Speaker's Statement

Mr Speaker: I have a statement to make to the House. I have to inform the House that, as required by section 144 of the Representation of the People Act 1983, I have received the certificate from the judges appointed to try the election petition relating to the Oldham East and Saddleworth constituency election on 6 May 2010. The judges have determined that the election was void pursuant to section 159 of the Act because the candidate, Philip James Woolas, was personally guilty of an illegal practice. I shall lay the report and certificate on the Table, together with the full judgment and the shorthand writer's notes, and will cause the full text of the report and certificate to be entered in the  Journal. Members wishing to read the report and certificate for themselves will find it set out in the  Votes and Proceedings for today, which will be circulated with the Order Paper in tomorrow's Vote Bundle, available online and from the Vote Office. The full text of the judgment has been published by the court on the judicial communications website. I shall place a copy in the Library.
	In accordance with section 160(4) of the Act, Mr Phil Woolas has been reported personally guilty of an illegal practice and must vacate his seat from the date of the report, 5 November 2010. I am advised that a renewed application for judicial review has today been made to the administrative court. The administrative court judge has ordered an expedited hearing of the renewed application as he considers it essential that the electorate of Oldham East and Saddleworth should know who is their Member of Parliament as soon as possible. My ruling is that this engages the House's sub judice resolution, and that therefore the judgment of the election court cannot be debated in the House until court proceedings are concluded. I will not take points of order on this matter now; the opportunity for points of order will come after the 3.30 pm statement.

ORAL ANSWERS TO QUESTIONS

DEFENCE

The Secretary of State was asked-

"Fighting Fit" Report

Gordon Marsden: What steps he is taking to implement the recommendations of the "Fighting Fit" report on the provision of mental health services for service personnel and veterans.

Liam Fox: The Ministry of Defence takes the issue of mental health very seriously and warmly welcomes the findings of the "Fighting Fit" report from my hon. Friend the Member for South West Wiltshire (Dr Murrison). We strongly endorse its key themes and recommendations. I wish to thank my hon. Friend on behalf of the House and the Government for his timely and well-considered report. We are working closely with the Department of Health, the NHS and voluntary and community sector organisations to implement these recommendations.

Gordon Marsden: As Member of Parliament for a town that has very much led the way in support for veterans and service personnel, and as chair of the all-party group on veterans, I, too, warmly welcome the report by the hon. Member for South West Wiltshire and the Government's endorsement of it. One of its recommendations is for the setting up of a veterans' information service, which is a positive and constructive proposal, but does the Secretary of State share my concern that membership of it will cost £70 a year? Is there not a danger that that might deter some of the most vulnerable service personnel-for example, those struggling to find work or those on low incomes-from signing up?

Liam Fox: The issue of access is important. I hear the point that the hon. Gentleman makes and I shall ensure that securing access for all who may be eligible, including the most vulnerable, is at the forefront of our discussions about the implementation of this report.

Andrew Murrison: I am extremely grateful to my right hon. Friend for his welcome for my report and for the help that he has given in its preparation. He shares my concern for people with mild traumatic brain injury and knows that a British combat soldier is likely to face exposure to between six and nine improvised explosive device explosions in the course of his career, with the consequent risk of mild traumatic brain injury. Does he agree that more needs to be done to determine the prevalence of mild traumatic brain injury in the British military and to prevent and mitigate its effects?

Liam Fox: Indeed. There is a great deal of interest in this particular element of scientific research on both sides of the Atlantic. I recently visited the veterans agency in the United States to ascertain what the updated information was. We will certainly want to consider all the evidence as it comes forward. It is an emerging science and we will get different types of information as we go through, but the art will be to try to ensure that we best titrate the treatments available to the information given to us scientifically at any one time so that we operate on the basis of evidence, not supposition.

V-shaped Military Vehicles

Philip Davies: What representations he has received from senior military officers on the deployment of V-shaped military vehicles.

Peter Luff: Ministers routinely have discussions with senior military officers on a wide range of issues, including vehicle protection. The advantages in blast protection that can be provided by a V-shaped hull are well understood and Mastiff, Ridgback and the new Wolfhound vehicle all incorporate this into their design. The vehicle selected for the new light protected patrol vehicle will also have a V-shaped hull. It would, however, be an oversimplification to suggest that vehicle protection is driven solely by hull design. The type of protection used on any given vehicle is very much driven by the capability the vehicle is designed to meet and the threat it is expected to face.

Philip Davies: I am grateful to my hon. Friend for that answer, but as he will know that has not always been the case. There was originally some resistance from the Army to introducing the V-shaped hull vehicles and if it had not been for the work of people such as Ann Winterton in this Chamber, as I am sure he recognises, they might never have been introduced. Given that, will the Minister assure us that when the troops finally withdraw from Afghanistan, the Government will not dispose of these vehicles in favour of the prehistoric design of the future rapid effect system's vehicles?

Peter Luff: It is a great pleasure to join my hon. Friend in paying tribute to Ann Winterton, whose sterling work on this issue and many others in this House has made a contribution to the happier place that we are in than might otherwise have been the case. Commanders probably now have the range of vehicles they need to cope with the different threats they face in theatre. My hon. Friend is absolutely right to emphasise the importance of ensuring that once the Afghan war is over we learn the lessons and have the appropriate range of vehicles in place to ensure that we can deal with future threats, too.

Ian Davidson: Given that the question of deployment depends very much on availability and reliability-not only of our vehicles and equipment but of those of our allies-and given that aircraft carriers are V-shaped vehicles- [ Interruption. ] They are undoubtedly V-shaped vehicles; there is no doubt about that at all. What views does the Minister have on the fact that the French aircraft carrier, Charles de Gaulle, has broken down yet again and is not available?

Mr Speaker: I am very grateful to the hon. Gentleman.

Peter Luff: Mr Speaker, your characteristic generosity has allowed the hon. Gentleman to proceed with his question. I am not sure that a carrier is a vehicle, but never mind-we will let that go. I hear what the hon. Gentleman says and, like him, I wish we could buy three of our own aircraft carriers; he challenged me on this on Monday. We cannot do that, I am afraid, and I think we have adequate arrangements in place to sustain carrier strike in the future.

Trident Replacement

Julian Huppert: What his most recent estimate is of his Department's likely expenditure on Trident replacement in this Parliament.

Liam Fox: The 2006 White Paper "The Future of the UK's Nuclear Deterrent" set out the initial estimated total procurement cost of the replacement nuclear deterrent as £15 billion to £20 billion in 2006-07 prices. The likely expenditure is dependent on the decision on initial gate, which is yet to be taken. I propose, however, to update Parliament on progress, including costs, after the initial gate decision through the publication of a report.

Julian Huppert: Will the Secretary of State assure me that no binding contracts will be entered into, as we have seen with aircraft carriers and the disgraceful contract in that case, so that if-as I hope-the next Parliament realises that we do not want or need to replace Trident, it will be able to do so at no huge expense?

Liam Fox: The Government's position is quite clear: we will replace the nuclear deterrent and we will replace it with an update of the Trident programme. It is unavoidable that, when we get to initial gate, contracts on the design at least will be placed.

Paul Flynn: Can the Secretary of State describe any plausible situation in which Britain would use a nuclear weapon independently, because our present policy encourages other nations, however unstable, to acquire their own nuclear weapons for defence?

Liam Fox: The whole point of the nuclear deterrent is to deter, therefore we shall not use it. The success of our whole policy of nuclear deterrence since world war two is that we have never had to use it.

Julian Lewis: I realise that nothing would please my right hon. Friend more than to go into the next election fighting in defence of the rationale for the nuclear deterrent. Does he not recognise, however, that the appalling decision to postpone signing the main gate contracts leads us to a situation in which if-heaven forbid-there is another hung Parliament, the Liberal Democrats, who are really unilateralist, would be able to blackmail both parties to cancel the deterrent entirely?

Liam Fox: There are two things of which I am sure. The first is that my own belief in the need for an independent, minimal, credible nuclear deterrent for the United Kingdom is and will remain undimmed. The second is that I shall be fighting the general election to see a majority Conservative Government returned.

John Woodcock: The Secretary of State has said on many occasions that delays in defence contracts end up costing the taxpayer more. Will he say how much extra cost will be incurred by the delay to the Trident programme and the stretching out of the Astute drumbeat that that has necessitated?

Liam Fox: The hon. Gentleman is at least partly correct. There will be additional costs to maintaining the Vanguard class through to 2028. We expect those to be around £1.2 billion to £1.4 billion extra to maintain those submarines for longer. However, his analysis would be far more correct if the ultimate decision to delay the in-service date increased the cost of the successor programme. As no cost will be set out until after main gate, it is impossible to make that assumption.

Mental Health Care Provision

David Burrowes: What assessment he has made of the effect of the outcomes of the strategic defence and security review on mental health care provision for service personnel.

Richard Ottaway: What assessment he has made of the effect of the outcomes of the strategic defence and security review on mental health care provision for service personnel.

Liam Fox: The strategic defence and security review committed an additional £20 million per year for the provision of health care to service personnel, part of which will be used to deliver further enhanced mental health care services. It is planned that this will include an uplift to the numbers of specialist and supporting mental health personnel.

David Burrowes: Although I welcome the Government's commitment to increase mental health services for servicemen and veterans, does my right hon. Friend share my concern about the need to tackle the prevalence of dual diagnosis alcohol-related disorders given that it has an impact on those who are in the transition to civilian life, with some ending up in the criminal justice system?

Liam Fox: Indeed, my hon. Friend makes an important point. A range of different groups suffer from mental health problems, both inside and outside the armed forces. There are those who come into the armed forces with a problem-either a mental health problem or a substance-abuse problem-those who develop one during their time in the armed forces and those who subsequently develop one. In a civilised society, it is very important that we ensure that all three groups are properly looked after. I would go so far as to say that it is the measure of how civilised a society we are that we look after the most vulnerable, and those with mental health problems must be in that group.

Richard Ottaway: Will the Secretary of State take this opportunity to pay tribute to service charities such as Combat Stress? It can take quite some time before mental health problems become apparent. It is important to support our veterans in the long term and not just in the short term or in the immediate aftermath of their retirement from the service.

Liam Fox: My hon. Friend makes an excellent point. Recent evidence suggests that post-traumatic stress disorder is likely to present at a peak at about three years, but may take as long as 14 years to present. It is therefore important that we recognise and see through our through-life responsibility to our armed forces. It cannot be right that our duty of care ends at the point of discharge from the armed forces themselves.

Jeffrey M Donaldson: Has the Secretary of State considered the impact on former serving personnel of the proposals by the Government to remove the mobility component of the disability living allowance benefit for those residing in residential care accommodation, which includes, of course, many ex-service personnel?

Liam Fox: On all the issues affecting the changes set out to welfare, there have been considerable cross-governmental discussions. I shall continue to have discussions with my colleagues because it is right, as I said, that we look after not only those who are serving but those who have served in a way that is indicative of the services that they have already given to this country.

Gemma Doyle: The Government are reviewing tour lengths and the interval between tours. At the same time, they intend significantly to reduce the size of the deployable force. This means that operational commitments will increasingly fall on the same individuals with greater frequency. Does the Secretary of State share my concern that that will have serious consequences for the mental health and well-being of our troops?

Liam Fox: Leaving aside the assumptions in the hon. Lady's question, which are an argument in themselves, her key point is whether the incidence of post-traumatic stress disorder is related to tour length or tour frequency, or a combination of the two. Evidence increasingly tends to suggest that the key element is the length of the tour rather than the frequency, and that, of course, will instruct the Government's thinking.

Menzies Campbell: Does the Secretary of State accept that mental health issues sometimes come to light only as a result of self-referral and that the culture of all three services is against such self-referral? Is one way of dealing with that to ensure that, during training, people-and not just those who will be in the chain of command-accept and understand the possibility of mental health issues arising, and that they are willing to recognise that and, if necessary, to take steps to deal with it?

Liam Fox: That is true for not only the armed forces but society in general. Only when we, as a society, remove some of the taboo of mental illness will we properly unlock the ability to deal with it successfully. My right hon. and learned Friend is correct that we need to look at people's willingness to self refer, and that process is made easier if they can contact a helpline run by members or ex-members of the armed forces, in whom they are likely to be able to place greater faith.

Madeleine Moon: The King's college review of mental health services for the military says that one way in which the mental health of those serving in theatre can be impacted is if they feel that their families are not being supported. Given the review of allowances that has taken place, how will we ensure that our serving personnel are confident that their families have good support and appropriate allowances?

Liam Fox: The hon. Lady is absolutely correct. One thing that I learned during the five years I worked alongside the armed forces and their families as a doctor was that if one wants to create unhappy service personnel, the surest route is to create unhappy service families. We must examine the situation as a whole, and we need to look at all elements of the military covenant-not just the financial elements that she mentions, but service education, access to health care for service families and other welfare issues, including accommodation.

Service Personnel (Germany)

Greg Hands: What timetable he has set for the return of service personnel garrisoned in Germany; and if he will make a statement.

Nick Harvey: As the Prime Minister announced on 19 October in the House, as part of the strategic defence and security review, the Government have decided to accelerate the rebasing of the 20,000 military personnel in Germany with a view to returning half those personnel to the UK by 2015, and the remainder by 2020.

Greg Hands: Will my hon. Friend ensure that whatever decisions are made, we continue to consult our German allies closely while also showing our thanks to the many communities throughout northern Germany that, for 65 years, have welcomed our troops as neighbours, friends and, principally, as defenders?

Nick Harvey: I am happy to give my hon. Friend the assurance that he seeks. I echo his comments about the outstanding support and friendship that the German people have given our forces over many decades. We recognise that the decision has significant implications for them. We will consult closely the German authorities at all levels as our plans develop.

Michael Dugher: In his statement to the House on 19 October, the Prime Minister said that changes in the Ministry of Defence would save £4.7 billion and that that would be
	"made easier by the return of the Army from Germany."-[ Official Report, 19 October 2010; Vol. 516, c. 798.]
	However, the Minister stated in a written answer on 27 October that it is
	"too early to say what the financial impact will be".-[ Official Report, 27 October 2010; Vol. 517, c. 369W.]
	Given that confusion, will he tell us whether there will be early cash savings or, in fact, significant early costs associated with the move?

Nick Harvey: I welcome the hon. Gentleman to the Dispatch Box in his new role and congratulate him on his appointment. Work is in hand to start on a detailed rebasing plan. He is right to assume that moving troops back from Germany will involve an initial up-front cost, but it is important to stress that big savings will be made in the long term, because there are implicitly high costs involved in maintaining troops in Germany, and the operational rationale for their being there ceased long ago.

HMS Sultan

Caroline Dinenage: If he will assess the merits of putting to use the spare capacity at HMS Sultan in Gosport as part of his review of the defence training estate.

Nick Harvey: Following the announcement on 19 October of the decision to terminate the defence training rationalisation procurement, work has now begun on alternative options for the location or locations of future defence technical training. Changes to technical training and estate requirements arising from the strategic defence and security review will be taken into account and HMS Sultan will be considered as part of that process.

Caroline Dinenage: As the Minister knows, HMS Sultan already provides engineering training not just for the Navy and the Army, but for commercial organisations such as Network Rail. It recently had an excellent Ofsted report, and the good news is that it has spare capacity to do even more. Does the Minister agree, therefore, that in the spirit of good financial common sense, the Department should consider consolidating all existing military engineering training at that excellent site in my Gosport constituency?

Nick Harvey: I am happy to pay tribute to the work that goes on at HMS Sultan and congratulate everybody involved on the excellence of the training that is given. It would not be practical to bring all defence technical training together at that site but, as I stressed in my earlier answer, we are looking at location or locations, and HMS Sultan will be considered fully as part of that review.

Chief Coroner's Office

Diana Johnson: What recent discussions he has had with the Secretary of State for Justice on the likely effects on the conduct of military inquests of the proposed closure of the chief coroner's office.

Nick Harvey: Ministers have consulted on this matter, and my officials have been extensively involved in discussions with the Ministry of Justice about the abolition of the chief coroner post. In the current challenging financial climate, the Government have to consider all expenditure very carefully. We judge that there will be no significant impact on the conduct of inquests into the deaths of members of the armed forces.

Diana Johnson: The British Legion's recent poll showed that a large majority of the British public back retaining a chief coroner to ensure that bereaved families have the support and reassurance that they need at inquests. Will the Minister look again at that, in order to provide support for those bereaved families?

Nick Harvey: We are firmly committed to ensuring that families have all the support they need at inquests, but we do not believe that the creation of the post of chief coroner is an essential prerequisite to achieving that. We will continue to give every possible help we can to families involved in such inquests, and we will maintain close contact with the British Legion as we discuss those matters.

Patrick Mercer: The Minister will be aware of a small but important number of British military fatalities that have been caused in joint operations with US forces. In their inquests, the US forces have completely different sets of rules, and it is sometimes very difficult to find out the truth or the details of those deaths. The coroner's office has been extraordinarily useful and helpful in these matters. Can the Minister assure me that there will be no further delay once the post is abolished?

Nick Harvey: The various functions will continue to be exercised by the Attorney-General or by the Ministry of Justice. I will give my hon. Friend an undertaking to keep a close eye on that aspect and ensure that there are no delays as a consequence of the decision.

Kevan Jones: My hon. Friend the Member for Kingston upon Hull North (Diana Johnson) raises the support that the British Legion gave to the appointment of a chief coroner. I know from my time as a Minister in the Ministry of Defence that that was supported by a range of service charities and by the families federations. If we are not to have a chief coroner, can the Minister explain how we will get consistency across the country in inquests into military deaths?

Nick Harvey: The Lord Chancellor will take a proactive approach to ensuring that coroners conduct their investigations to national standards, including a best practice approach to conducting military inquests and monitoring cases that take more than 12 months to complete. A new complaints system will be considered as part of the work that the Ministry of Justice intends to take forward on a charter for bereaved people.

National Defence Medal

Lorely Burt: If he will bring forward proposals for a national defence medal to recognise non-operational military service.

Andrew Robathan: The Government hold the professionalism, courage and contribution of all those who serve or who have served in the armed forces in high regard. I understand that some people believe that their service, and the service of all personnel, should warrant a medal. The coalition Government are committed to reviewing the rules governing the award of medals. However, at present, there are no plans to recommend to Her Majesty the introduction of a national defence medal.

Lorely Burt: I very much welcome the review. We are just a few days away from Remembrance day, and since 1919 we have been remembering the sacrifice of our armed services. Today, however, we have much improved media and greater transparency, and we understand more the mental, emotional and physical sacrifice that all our armed services personnel make. Is now not the time to include a national defence medal in that review?

Andrew Robathan: We are going to have that review, and may I recommend to the hon. Lady that she puts forward her views at that time? Indeed, I know that they represent her party's policy, which it adopted at a recent conference. Medals are awarded for campaign service because they recognise the risk and rigour of deployment, which is considered to be more extreme than when, I am afraid, people are in a barracks or at home on a base.

Denis MacShane: May I urge the Minister to err on the side of generosity? The previous Government could not take on the review committees of retired colonels and General Blimps, who refused to order even a Bomber Command campaign medal. People like to wear medals and are very proud of the Army now, and they also serve who serve in this country. I hope that the Minister will not shove the idea out to a review. He should come back and accept the hon. Lady's suggestion.

Andrew Robathan: As I have said, we are not shoving the idea out but having a review. Some who have served would like to see a national defence medal, but my experience is that probably the majority of those who have been in the armed forces and then left accept the decisions that were made when they were serving and do not wish to revisit history in that way.

Former Service Personnel (Support)

Henry Smith: What support his Department provides to those who have served in or are about to leave the armed forces.

Rehman Chishti: What support his Department provides to former armed forces personnel who have served in Afghanistan.

Andrew Robathan: Regardless of where, or for how long, a member of the armed forces has served, all are entitled to receive some form of resettlement support. That ranges from housing advice through to vocational training. In addition, employment consultancy support is available through the career transition partnership for up to two years after leaving, as well as lifetime job-finding support. Those who are medically discharged will receive the full resettlement package.

Henry Smith: I am very grateful to my hon. Friend for that answer. My local authority, Crawley borough council, is interested in investigating ways in which people who have left the services and are returning to their home town will not be disadvantaged by going on to the social housing list. Can he assure me that the Defence Secretary and my right hon. Friend the Secretary of State for Communities and Local Government will work together to ensure that military personnel leaving the forces are not disadvantaged on the housing list?

Andrew Robathan: I am delighted that my hon. Friend's local authority is taking that action. All service personnel are entitled to briefings on their housing options, and some 50 briefings a year take place nationwide and, indeed, abroad. Advice includes obtaining property through a local authority, private renting or owning, and service leavers retain their key worker status for up to one year after having left. My hon. Friend will know that at the moment we are in very close discussions about the military covenant and how we can ensure that no one who leaves the services is disadvantaged when they return to their home area.

Rehman Chishti: I pay tribute to the Royal Engineers, who have two regiments serving in Afghanistan. What steps are being taken to ensure that veterans are given support in the transition back to civilian life?

Andrew Robathan: I echo my hon. Friend's tribute to the Royal Engineers. Veterans receive a great deal of support in resettlement. Everybody trying to return to civilian life from the services now receives support, and- [ Interruption. ] I wish the hon. Member for North Durham (Mr Jones) would not interrupt me. I was just going to say that a lot of that was put in place under the previous Administration. I accept that absolutely and pay tribute to them.
	However, there are resettlement courses. Everybody now receives them, and as they move on to seek employment, organisations such as the Regular Forces Employment Association, for instance, help those who have left.

Gisela Stuart: Will the Minister update the House on what progress he has made in working with the national health service to ensure that those who have left the armed forces continue to receive priority treatment?

Andrew Robathan: We are looking at how the Ministry of Defence and the service charities, and everybody else, interrelate in the military covenant. The local authorities to which I referred interrelate, and certainly the NHS does. There have been frankly regrettable incidents in which people have been unable, for instance, to get dental services or to get on to an NHS doctors list. We are looking at improving that situation. Again, I hate to say this, but the previous Administration did some good work on this as well.

Compulsory Redundancies

Nicholas Dakin: What recent discussions he has had on compulsory redundancies from the armed forces as a result of the outcomes of the strategic defence and security review.

Liam Fox: I am in regular discussions with the chiefs of staff, and decisions on those selected for redundancy will be made by the individual services. A comprehensive implementation programme is being developed, and details will be promulgated by each of the three services in the coming months. We will ensure that those who leave are treated fairly and properly.

Nicholas Dakin: I thank the Secretary of State for his answer. He will agree, I am sure, that it is essential that the 25,000 civilian redundancies from the MOD announced in the strategic defence and security review do not result in service personnel being drafted in to fill the resultant gaps in capacity. Can he detail from which units within the MOD the redundancies will be made and outline any plans to supplement the lost capacity within the MOD?

Liam Fox: As I have just said, it is for the service chiefs to set out over the coming months exactly which redundancies they think will be necessary. I am sorry that I cannot be more specific at this time in relation to the services or to the civil service, as we will seek to use natural wastage and careful management of recruits in the armed forces to minimise the number of redundancies required.

Bob Russell: Will the Secretary of State give a guarantee that no soldier from 16 Air Assault Brigade currently serving in Afghanistan will be made redundant?

Liam Fox: We need to maintain the Afghanistan rotation. It is therefore in the interests of common sense and fair play that no personnel serving in Afghanistan, or on notice to deploy, will be given compulsory redundancy.

Jim Murphy: The Secretary of State will know that this weekend thousands of people marched in Lossiemouth against the proposed closure of the RAF base there. That base accounts for about 10% of jobs in the area. Some will argue that the proposed closure saves the MOD money, but in truth other parts of government will have to pick up the costs of increased unemployment and the failure of small businesses. May I therefore urge him to pause and think again about the devastating wider impacts that this proposed closure would have?

Liam Fox: First, may I welcome the shadow Secretary of State and his entire team to Question Time for the first time?
	Let me say at the outset that neither party in the coalition wanted to see redundancies in the armed forces, and we would not be making such redundancies had we not been handed an utterly poisonous economic legacy by Labour and, indeed, a Ministry of Defence budget that was massively overheated and incompetently run. Having said that, we are very well aware of the various consequences-social, economic and regional-of the whole question of basing. I give the right hon. Gentleman my absolute assurance that we will consider all those elements when we look at the future of Lossiemouth.

Jim Murphy: Returning to the issue raised by the hon. Member for Colchester (Bob Russell), we are all rightly in awe of the men and women of our armed forces, and I welcome the commitment that the Government have given to continuing to protect the front line in Afghanistan. However, the Government have announced redundancies of 7,000 in the Army, 5,000 in the Navy and 5,000 in the RAF-17,000 in total. Will the Secretary of State therefore guarantee that no one who has served in Afghanistan will face compulsory redundancy?

Liam Fox: It would not be possible for the Government to say that no one who had ever served in Afghanistan in any way, shape or form since 2001 would not be made redundant. I reiterate what I have said: that because we need to maintain the Afghan rotation, no one currently serving in Afghanistan, or on notice to deploy, will face compulsory redundancy.

Defence and Research Technology

Andrew Bridgen: What plans his Department has to increase the effectiveness of its defence research and technology programmes.

Peter Luff: We are publishing a Green Paper before the House rises for the Christmas recess that will set out our intended approach to industrial policy and the closely related issues of research and technology. The result will be published in a White Paper next spring that will formalise our approach for the five years until the next strategic defence and security review

Andrew Bridgen: I thank the Minister. Does he agree that the Ministry of Defence's strategy for investment in research and technology will determine the areas in which indigenous industrial capacity will thrive? Likewise, when the MOD decides not to invest but to buy in from abroad, that capacity will not thrive.

Peter Luff: It is certainly the case that ensuring sovereignty in the use of our armed forces often requires specific industrial capabilities to be maintained in the UK. That often involves research and development. However, I must emphasise that competition in the global market remains our preferred means of acquiring equipment at the best value for money, which means buying off the shelf where possible. I freely acknowledge that the issue is complex, which is exactly why we will consult formally on it in the Green Paper to which I referred.

Kevin Brennan: Could the effectiveness of defence research possibly have been enhanced if we had had a defence training college? The Minister will know of the bitter disappointment in south Wales about the announcement in the comprehensive spending review. What can he tell the House about the potential future of that development?

Peter Luff: The hon. Gentleman is ingenious in his use of his supplementary question. That is not a matter for which I am technically responsible, but I can reassure him that we are still examining carefully the consequences of the decision. That is all I can say at present, I am afraid.

James Arbuthnot: Does my hon. Friend agree that when money is tight, as it quite often seems to be, defence research and technology is an easy target for cuts because the effect is felt some way down the line? We saw that under the last Government. Can we please avoid seeing it under the current Government?

Peter Luff: I could not agree more strongly with my right hon. Friend. The last Government's massive slash-and-burn approach to the science budget was a major scandal and makes our task a great deal more difficult. The SDSR document makes it clear that we are maintaining our essential science and technology investment, and I can tell him that at present, we expect that budget to rise slightly in cash terms over the CSR period. That is not the ideal outcome, but it is a good one and I hope he will welcome it.

RAF Marham

Elizabeth Truss: What consultation he plans to undertake in determining the future of RAF Marham.

Nick Harvey: It will now take some time to work out the implications of the strategic defence and security review for defence basing, as the Secretary of State made clear a few moments ago. The work is now under way, and we will fully consult all the relevant agencies and the local communities that have given so much support to our armed forces over the years.

Elizabeth Truss: Has the Minister made an estimate of the cost of relocating engineering and maintenance facilities from RAF Marham? It is estimated at up to £50 million, and those facilities are a third more effective and efficient than their US counterparts. Will he also take into account the relative rate of unemployment, which is 7.4% in west Norfolk compared with 4.8% in Moray in Scotland?

Nick Harvey: My hon. Friend is referring to the Tornado depth maintenance facility, which includes centralised RAF and industry component repair facilities alongside the aircraft maintenance facility at Marham. It is unlikely that any decisions on Tornado basing will be taken before next spring at the earliest, but all relevant costs, including those arising from any necessary relocations, will be given full consideration prior to any decision being taken.

Queen Elizabeth Class Aircraft Carriers

Esther McVey: What timetable has been agreed for the building of the Queen Elizabeth class aircraft carriers.

Peter Luff: The strategic defence and security review was clear that we plan to deliver the carrier strike capability from around 2020. We are now working to provide the level of detail needed to decide exactly how that intention should be turned into reality. As the planning work is expected to take some months, we are not yet in a position to provide further details.

Esther McVey: On behalf of my constituents and the greater Merseyside area, I congratulate the Minister and his Department on the decision to continue the building of two Queen Elizabeth class carriers. Will he acknowledge with me the benefits for Wirral of the manufacturing continuing at Cammell Laird?

Peter Luff: The decision has not been without its controversy, but I am delighted to pay tribute to the work force at all the yards conducting the work on the carriers, including in my hon. Friend's constituency. I have seen that work at first hand in government, and it is a remarkable tribute to them. Whatever the controversy of the past, I am sure the work force will continue to give the project their very best, as they have up to now.

Thomas Docherty: Given that it will be significantly cheaper to build the "cats and traps" into the two aircraft carriers during construction, will the Minister confirm that when working up its plans, the MOD intends to work from the assumption that that is how it will be done?

Peter Luff: The hon. Gentleman is a doughty advocate for his constituents and for this particular project. All that I can tell him at this stage is that work has begun to consider the optimum means of delivering that capability, as a result of our decision to change to the much more capable carrier variant of aircraft. That includes considering the type of system, the cost, the procurement route, the delivery date and whether both ships should be converted. We are at a very early stage, and all I can say to him is that he should carry on pressing.

Military Bases (Scotland)

David Hamilton: What assessment he has made of the likely effects on the future of military bases in Scotland of the redeployment of service personnel stationed in Germany.

Liam Fox: The strategic defence and security review has set the aim of returning half our personnel from Germany by 2015 and the remainder by 2020. We are now assessing where in the UK those personnel will be located but no decisions have yet been made.

David Hamilton: I thank the Secretary of State for that response. Could I suggest to him that, when the troops come back from Germany, and with Scottish regiments currently garrisoned in England, it would make sense to look at Scotland as a garrison base? He knows it makes sense; it is the right thing to do.

Liam Fox: The hon. Gentleman can take that as one of the early submissions in the basing review that is being undertaken. The review will be for the Ministry of Defence to determine what makes the most sense in terms of the structure of our armed forces, in terms of where they are based according to where they need to train and operate from and in terms of ensuring value for money for the British taxpayer.

Angus Robertson: Will the Secretary of State confirm that any takeover of RAF bases by the Army will take a number of years, so we will still see massive economic and social dislocation in Moray? What concrete assistance has the Ministry of Defence already delivered to the Moray taskforce and how much assistance is it planning to deliver in the future?

Liam Fox: The ultimate impact, of course, will depend on the future of Lossiemouth, and no decision has yet been taken. However, I reiterate what I said to the hon. Member for Midlothian (Mr Hamilton): my job as Secretary of State, and the job of Ministers, is to ensure that our basing makes sound military sense. If there are other implications-regional implications or economic and employment implications-that go wider than the Ministry of Defence, that has to be taken into account by Her Majesty's Government as a whole.

James Gray: The Secretary of State and I are both Scots, and of course we would like the troops to return to Scotland, but does he not agree that RAF Lyneham has a stronger case than anywhere in Scotland?

Liam Fox: My hon. Friend can take that as the second submission to the basing review. One of the general points that I would make to him is that when the Army comes back from Germany, as my hon. Friend the Member for Chelsea and Fulham (Greg Hands) mentioned, there will be considerable long-term savings to be made, but we will need to have accommodation, to bear in mind bases that currently have accommodation and to assess what the cost would be of upgrading that accommodation to ensure that those bases could be utilised.

Military Equipment (Exports)

Nadhim Zahawi: What steps his Department is taking to increase exports of military equipment.

Gerald Howarth: rose-

Hon. Members: Hear, hear.

Gerald Howarth: I thank hon. Members for that welcome.
	This Government has made defence exports a priority. In the SDSR we said:
	"we will...promote defence and security exports for good commercial reasons and where this will build capacity of our partners and allies, increase interoperability, potentially reduce our own defence acquisition costs, and maximise UK industry's comparative advantage in key technologies, skills and know-how, without risking the proliferation of sensitive technologies critical to the UK's military edge."
	All Ministers are encouraged to play their part in promoting responsible defence exports and my right hon. Friend the Prime Minister has led the way in that regard.

Nadhim Zahawi: One of the ways to rebalance the economy is to promote exports of important hubs, and defence is an important industrial hub. I am very pleased to hear that the Indian Government are getting close to concluding that the Typhoon is the fighter that they want. Will the Minister say something about that order and how we are promoting further defence exports?

Gerald Howarth: We are delighted to read the reports in  The Sunday Telegraph-they must, therefore, be entirely accurate-that the Indian Government have found that the technical superiority of the Typhoon is overwhelming, and we of course share that view. We are doing all we can in conjunction with our partner nations to secure that order. In this case, the German Government are leading with the Indians, but I am very hopeful that when my right hon. Friend the Secretary of State for Defence visits India, we can further promote the case of the Typhoon.

Topical Questions

Stephen Phillips: If he will make a statement on his departmental responsibilities.

Liam Fox: My departmental responsibilities are to ensure that our country is properly defended now and in the future, that our service personnel have the right equipment and training to allow them to succeed in their military tasks and that we honour the military covenant.

Stephen Phillips: My right hon. Friend will be aware of the considerable concern expressed by a number of commentators about the capability that will be lost to the Royal Air Force with the cancellation of the Nimrod MRA4 programme. Will he tell the House what steps will be taken to ensure that that loss of capability does not adversely affect our national security?

Peter Luff: I must honestly say to the House that this was one of the most difficult decisions we were forced to take as a result of the mess in the national finances and the grossly overheated MOD budget that we inherited. Since the withdrawal of the Nimrod MR2 in March, the Ministry of Defence has mitigated the gap in capability through the use of other military assets, including Type 23 frigates, Merlin anti-submarine warfare helicopters and Hercules C-130 aircraft, and by relying, where appropriate, on assistance from allies and partners. That was originally assumed to be a short-term measure. We are now developing a longer-term plan to mitigate the impact of cancellation on our continuing military tasks and capabilities.

Jim Murphy: Regardless of what side of the House we are on, we are all very concerned about this weekend's reports of the smuggling of highly enriched uranium in Georgia and other parts of the Soviet Union- [Interruption.] I mean the former Soviet Union. We know there is sometimes only one step between organised criminals and global terrorists. In the light of those reports, can the Secretary of State guarantee that any UK-funded projects to combat the proliferation of, or trade in, chemical, biological and nuclear material will have their funding protected through this spending review period?

Liam Fox: I could not be in greater agreement with the right hon. Gentleman. It is easy to forget that there has been a great deal of nuclear material out there. Not only does that still pose a threat to global security, but the development of new nuclear weapons by countries such as North Korea and, soon, Iran, which is attempting a programme, presents us with a massive threat. It is essential that programmes that give this country protection are themselves protected.

Sajid Javid: The Government are right to focus on the cyber-threat facing our nation. Fortunately, in Britain, we have many home-grown technology companies, including in my constituency. Does the Minister agree that, in the interests of our national security and our national economy, we should prioritise the use of these domestic companies to the fullest extent?

Peter Luff: I am delighted to agree with my hon. Friend and parliamentary neighbour. The strategic defence and security review identified cyber-risks as one of the four tier 1 risks to national security, pledged additional funding for investment in this area of capability and said that partnership with industry will be key to ensuring value for money. It is also a theme that we are exploring in the Green Paper on defence industry and technology policy, which has been extended to include security, and I would be delighted to visit the companies in my hon. Friend's constituency of Bromsgrove at some stage in the future, if he would find that helpful.

Linda Riordan: More than two thirds of defence experts think that the defence review was a lost opportunity. Does that not prove that the review lacks strategy and was rushed to fit the needs of the spending review, rather than the needs of the armed forces?

Liam Fox: The defence review was carried out after the National Security Council decided upon an adaptive posture. However, we inherited budgetary constraints that we would rather not have had, and had the Labour party not left us with a toxic economic legacy as well as an overspent MOD budget, we might take some lessons from Labour Members.

Jake Berry: In the light of the forthcoming NATO summit in Lisbon, can my right hon. Friend update the House on what proposals we will be putting forward to ensure that NATO is modern and fit for purpose?

Gerald Howarth: As my hon. Friend would expect, given that the United Kingdom is being rigorous in making every penny count in our own defence budget, we will ensure that NATO's coat is cut according to its cloth, and we are expecting it to do that. My right hon. Friend the Secretary of State has been at the forefront of the campaign to reduce the number of people in NATO to about 9,000, and we hope very much that we can reduce the number of joint force command headquarters from nine to two, thereby saving money and making NATO more efficient.

Hugh Bayley: This morning, I dedicated a bench in a park to Trooper Ashley Smith of the Royal Dragoon Guards, who died in Afghanistan in June. He was a brave and selfless young man, and a good soldier, and I know that the Secretary of State and his Ministers will join me in offering their condolences to his family. I would like to pass on two things that his family said to me this morning: first, despite their grief, they think about the soldiers still in Afghanistan and want to ensure that they get all the equipment they need, and secondly they support the Government in their strategy to create conditions so that, within the life of this Parliament, our troops can be brought home.

Liam Fox: I am extremely grateful to the hon. Gentleman for the points that he has made, and I am glad to echo the tribute to Trooper Ashley Smith. I am also grateful for the sentiments expressed by his family.
	As the whole country heads towards Remembrance Sunday, this is an opportunity to remember that it is not just the sacrifices of the past that we are commemorating, but the sacrifices being made today. It is essential not only that this country supports our troops, but that we support their mission, because that is what they are asking us to do. It is important for the morale of those serving that we do so, but it is also important for the peace of mind of the families who have lost loved ones to know that their sacrifices were not in vain.

Mark Menzies: I would like to thank the Secretary of State for including a UCAV programme-a programme for unmanned combat aerial vehicles-in the SDSR, which is important for jobs in my constituency. Will he say when he will be in a position to give the House more details on the UCAV programme?

Peter Luff: There are two aspects to this. First, there is the future of the fixed-wing sector strategy, which we will be consulting on as part of the Green Paper and White Paper process. There is also the question of UK-French collaboration on unmanned combat aerial systems of the kind that my hon. Friend talks about. The declaration that accompanied the Anglo-French summit last week made it clear that we would establish a joint assessment of
	"requirements and options for the next generation,"
	which are expected from about 2030 onwards.

Rosie Cooper: Could the Secretary of State share with us his assessment of the impact of service personnel reductions on the UK's military capability?

Liam Fox: We have specifically tasked the armed forces with ensuring that the reductions in military numbers that we have required of them, as a result of the defence review and the budgetary pressures on us, do not impact on Britain's military capabilities.

Mary Macleod: As we approach Armistice day and pay tribute to all those who gave their lives for this country, let me say that I will be attending the opening of the redeveloped Chiswick memorial homes. What message can I give our veterans about what this Government will do for them?

Andrew Robathan: It is indeed Armistice day on Thursday, and the plethora of poppies around this Chamber are not just for window-dressing, but show that people in this Chamber care about Armistice day and the sacrifice that past generations have made. The message that I would give to veterans is that we will certainly look after our ex-service personnel as best we can. We are pledged to reinvigorate the military covenant, and if my hon. Friend watches this space, as it were, she will see that happening pretty soon. Finally, I understand that the Under-Secretary of State, my hon. Friend the Member for Aldershot (Mr Howarth) will be attending the event in Chiswick, and I hope that it goes extremely well.

Tom Blenkinsop: What estimates has the Minister made of the total financial cost of military base closures in Germany?

Liam Fox: As I indicated to the House earlier, we are currently looking at the full implications of bringing the Army back from Germany. There will undoubtedly be some up-front costs, depending on the pace of those forces coming back, but there will be considerable savings, to be set out over the longer period. We will set those out when we conclude the basing review in six months.

Bob Russell: I thought that the Minister's response to the question from my hon. Friend the Member for Solihull (Lorely Burt) was lacking in political direction and conviction. Bearing in mind that Her Majesty the Queen, as the Head of State of both Australia and New Zealand, has graciously authorised the award of a national defence medal, can we not have that in the United Kingdom for those who have served?

Andrew Robathan: We are certainly never lacking in direction. What I would say is that when the Queen is dealing with matters in New Zealand and Australia, she is the Queen of New Zealand and Australia, and that does not necessarily mean that we will follow exactly what happens in New Zealand and Australia. We are reviewing matters, but as I said before, campaign medals are awarded for the deprivations of campaigns and the extra need to recognise people for their hard work on campaigns. That is not to denigrate service in barracks, but it is a very different thing, if I might say so.

Tom Watson: The Secretary of State has talked about the difficult decisions that he has to make on cutting civilian and military jobs in his Department. In that light, can he give an assurance to the House that he has no intention of employing a photographer, stylist or personal film-maker?

Liam Fox: No.

Daniel Poulter: Aid agencies in Afghanistan have expressed concern that offering cash rewards in exchange for information puts Afghans, their families and their communities at risk from anti-Government groups. Can the Minister assure me that this practice is not being followed by British commanders?

Nick Harvey: In operations in the environment of Afghanistan, our forces must of course work in co-operation with both Afghan authorities and local people to obtain information that is essential to the security of our personnel and others working in the international security assistance force. I am aware that any form of co-operation with ISAF may put people in danger of reprisals, but clearly we rely heavily on such information.

Huw Irranca-Davies: During the second world war, many thousands of young women were conscripted into service in royal ordnance factories. There were 45 throughout the United Kingdom, and many in Scotland, the north-east of England and Wales. Will the Secretary of State agree to meet a small delegation of MPs to discuss appropriate recognition of those young women, many of whom lost their lives or suffered grievous injuries when filling explosives?

Liam Fox: I can certainly assure the hon. Gentleman that one of the ministerial team will undertake such a meeting. His point is important. In any conflict in which this country finds itself, it is not only those in the military who make sacrifices, but often those in the civilian population. In Afghanistan today, we are seeing probably the highest level of civilian support for the military that we have ever seen in any conflict. I pay tribute to all those civilians who add to the national security of this country, and to their sacrifices in its name.

David Ruffley: I have the privilege of representing RAF Honington, which is home to the RAF Regiment, and Wattisham, which is home to the Army Air Corps. Will my right hon. Friend speak to the Secretary of State for Health to ensure that more mental health provision is directed to areas of this country where the highest proportion of servicemen and women and their families live?

Liam Fox: As part of the comprehensive spending review, we had a financial deal with the NHS to transfer NHS funding to the MOD for precisely that reason. As I told the House earlier, one of the ways that we must measure how civilised and decent a society we are is how we deal with those with mental illness, whether in the armed forces or outside. As a society, we have a lot to do to remove some of the taboos surrounding that, but if we can make a start in the armed forces, that would be great. Indeed, were we to get to the end of this Parliament and those in the NHS were crying out for the same quality of mental health care as those in the armed forces, that would indeed be a triumph.

Jim McGovern: Will the Secretary of State tell the House what assessment has been made of the outcome of the strategic defence and security review on companies and organisations that are dependent on MOD contracts? I am thinking of Remploy, but I need not go into the history of its origins. A Remploy factory in my constituency depends almost entirely on MOD contracts, and its employees have made representations to me. What assurances can he give my constituents?

Liam Fox: I am extremely aware of the dependence of a large part of the economy on the MOD's budget. Precisely because we are so aware of that, we will produce a consultation document in the near future, which will look at the supply chain as it relates to the MOD and its budget. The Government's aim is that small and medium-sized enterprises are given every opportunity to help us to shape the regulatory framework and the skills base required so that we can ensure that they are given every possible help to remain in business.

Mark Lancaster: From 13 December Camelot intends to change its rules, which will prevent many members of our armed forces who are serving overseas from playing the national lottery. It is a simple pleasure, and as they remain UK taxpayers, will the Secretary of State look into the matter and attempt to persuade Camelot to change its mind?

Andrew Robathan: This is news to us. I assure my hon. and gallant Friend that I will certainly look into it and let him have a proper answer when I have done so.

Angus Robertson: The Secretary of State will be in Oslo this week for meetings with Nordic Defence Ministers. How will he convince them that he is serious when he has just scrapped the UK's maritime reconnaissance fleet, is thinking of moving the joint combat aircraft away from the north of Scotland, and is considering closing both airbases closest to Norway?

Liam Fox: I shall point out our commitment to the submarine programme and to the aircraft carrier programme, and explain how we intend to ensure that across the range of capabilities the United Kingdom is a sound and secure NATO partner. The purpose of the meeting in Norway is to ensure that we deepen our bilateral relationship with Norway, that we create a NATO entity that Finland and Sweden feel a little more comfortable with, that we give further security to article 5 in the Baltic states by being a nuclear power as part of that grouping, and that as a NATO grouping we are better able to deal with regional disputes with Russia.

Duncan Hames: The Secretary of State acknowledges that civilian redundancies might impact on personnel in Corsham in my constituency. Given their deep expertise in defence communications technology, will he consider opportunities for their redeployment as part of the Government's programme for cyber-security?

Liam Fox: We are indeed looking at all opportunities to improve our arrangements for cyber-security. We have for the first time created a cross-departmental cyber-budget, for example. We will be looking inside the Ministry of Defence to see how we can better prepare ourselves not for the threats of the future but for the threats that we already face, given the level of cyber-attacks already occurring in this country and in those of our allies.

Several hon. Members: rose -

Mr Speaker: Order. As usual at Question Time, demand has exceeded supply, but we must now move on.

Departmental Business Plans

Oliver Letwin: With permission, Mr Speaker, I wish to make a statement on today's publication of departmental business plans. When we formed the coalition in May, we committed to a programme of fundamental structural reform that would change the nature of government. Of course, I recognise that it was the aim of the Labour Government to improve public services, to get value for money and to deliver their stated aims. The problem lay in the fact that, to achieve those laudable aims, they set up a system of bureaucratic accountability in which almost everything was judged against a set of centrally mandated, politically determined performance targets. They then used a succession of short-lived bureaucratic interventions to try to make people fulfil the targets.
	Alas, the evidence of the past 13 years shows that targets and short-term bureaucratic interventions simply do not work. Despite all the new learning strategies in schools, the gap in educational achievement between the richest and the poorest widened; despite all the NHS targets, cancer survival rates in Britain were among the lowest in Europe; despite all the police form-filling and bureaucracy, there were more than 100,000 incidents of antisocial behaviour every day; and, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) has famously remarked, the money ran out.
	So, we have argued for a power shift that will take power away from Whitehall and put it into the hands of people and communities, rebalancing the relationship between the citizen and the state. We recognise that Britain can make progress only if the Government establish frameworks that help people to come together to make life better. We have also argued for an horizon shift-[Hon. Members: "Hooray!"] Opposition Members will hear a lot of that term over the next four years, so they should get used to it. We have argued for an horizon shift, moving away from short-term bureaucratic interventions towards governing for the long term, establishing the right frameworks of incentives in the public services, sorting out the public finances and investing where it counts to create sustainable economic growth.
	The publication of our departmental business plans is a significant part of achieving both that power shift and that horizon shift. In June, the Prime Minister launched a series of draft structural reform plans, in which Whitehall Departments publicly set out their reform priorities and the actions that they will take to achieve them, with a specified timetable. In July, August, September and October, we issued monthly reports on the draft plans, setting out the actions that had been completed or started, and giving explanations of any missed deadlines. Today, taking into account the results of the spending review, we are publishing the final departmental plans, setting out the vision, priorities and structural reforms of each Department.
	These plans are a key part of our transparency agenda. They do not set out hopes for what we might achieve by micro-managing all the public services. They set out what we need to do, to manage the Government properly. That is, after all, our business, and we expect to be judged on whether we do it properly. The publication of the plans will bring about a fundamental change in how Departments are held to account for implementing policy commitments, replacing the old top-down systems of targets and central micro-management with democratic accountability. Every month, Departments will publish a simple report on their progress towards meeting their commitments- [ Interruption. ]

Mr Speaker: Order. In a way, it is a good thing that the House is in a jocular mood. I realise that the right hon. Gentleman is no longer a philosophy tutor, but I feel sure that he is accustomed to a slightly more cerebral response and deferential hearing than he is getting.

Oliver Letwin: I am grateful, Mr Speaker, for that help, but I have to say that I had not anticipated anything better than I received, because Labour Members presided over a Government who acted like a magazine and we intend to preside over a Government who act like a Government. That is a profound difference and I recognise that it is very uncomfortable for Opposition Members.
	Before I go on, I should correct myself as I believe I slipped into referring to 100,000 incidents of antisocial behaviour when I meant 10,000. I apologise to the House. That is an example of transparency and straightforwardness, which I hope will be replicated as we move forward.
	In addition, the second part of each business plan explains how Government will give people unprecedented access to the data they need-in a simple, easily accessible form-to scrutinise how we are using taxpayers' money and what progress we are making in improving society through our reforms. These transparency sections of the plans are being published in draft to allow Parliament and the wider public to say whether each Department is publishing the most useful and robust information to help people hold each Department to account.
	Select Committees will, of course, play a vital role in the task of holding the Government to account. My Cabinet colleagues are therefore contacting Select Committee Chairmen to inform them of the new processes and to invite them to discuss the business plans in more detail in their Committees.
	Once the reforms described in these business plans are fully implemented and the transparency reports are fully in place, we will have a real people power revolution- where people themselves are equipped with the power and information necessary to improve our country and our public services, through the mechanisms of democratic accountability, competition, choice and social action. I commend this statement to the House.

Liam Byrne: I start by welcoming the new Minister for milestones to the House. I could tell that he was the right Minister for this job when I received his statement three hours before he stood up. I thank him for that and urge the same habit on his hon. and right hon. Friends.
	I also welcome the thrust of the Minister's statement. When Labour came to power in 1997, we discovered that the Conservatives had run public services into the ground. Now, thanks to Labour's investment-and, yes, Labour's management-crime is now down 43%, hospitals have the shortest waiting lists on record and our schools and teachers are delivering record results for our children aged 11, 16 and 18, with 70,000 a year achieving good results.
	The question was always going to be: what was the way forward after Labour's job of repair? I am glad that the Government have seized on some of the principles set out in our White Paper, "Smarter Government", published last year. It was described at the time as
	"a radical dispersal of power to patients, parents and citizens".
	Today, however, the Minister tells us that his first step is to make departmental plans transparent. May I tell him that the only revolution he has delivered this afternoon is to make bad plans transparently bad plans? There will be no power shift if he is going to destroy the power of NHS patients to be treated within 18 weeks; the power of parents to get one-to-one tuition for their children if they are falling behind at school; the power of citizens to summon police officers to talk about issues of local concern.
	I have only one question: if the Minister is serious about improving government-and I believe he is-will he review the ending of basic rights to high-quality public services across this Government? When it comes to public services, the public want guarantees, but all he has offered them this afternoon is an online gamble.

Oliver Letwin: First, I should welcome the welcome. As I think the right hon. Gentleman knows, I am one of the longest-term proponents of consensus not only between members of the coalition but across the whole House. If the right hon. Gentleman is in effect saying that the Opposition will now back the general principle of having a clear timetable for actions, input measures, outputs-

Kevin Brennan: Targets?

Oliver Letwin: No, not targets.

Kevin Brennan: Milestones?

Oliver Letwin: Mr Speaker, perhaps you will forgive me if, to avoid further confusion in the hon. Gentleman's mind, I explain the difference between a target and a milestone. A target is an effort by a Government, of which there were many under the previous Government, to determine what the whole of the public service would achieve through micro-management. Such targets were often not met. What we are talking about are actions that lie under the direct control of Government and which it is absolutely right that we should manage ourselves.
	To return to the point I was trying to make, if the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) is welcoming the idea that we should set these things out clearly and he is going to sponsor that as an approach to government, that would be in the interests of the nation, because we could continue that process over many years and that would be a huge advance.
	The right hon. Gentleman asked whether we can achieve a power shift if we do not do certain things, and he mentioned citizens talking about policing with police officers.

Liam Byrne: Summoning.

Oliver Letwin: Yes, summoning police officers to talk about that. We propose something very different, which goes beyond that. Yes, we will have beat meetings, but we will also allow people to vote for police commissioners so that they actually have accountability. That is what we mean by choice and power, as opposed to the mere window dressing of the ability to talk.

Tony Baldry: May I make a suggestion? My right hon. Friend says in his statement that every month Departments will publish a simple report on the progress they have made towards meeting their commitments. On the day each month when ministerial colleagues from different Departments come to the House to answer oral questions, might they not also make a written statement that all of us can see? I confess that I find it difficult to keep my own website up to date, so watching the websites of 22 Government Departments will be quite challenging. However, we are all focused once a month on each Department's oral questions, and a written statement coinciding with that would be very helpful.

Oliver Letwin: As so often, my hon. Friend makes an extremely valuable suggestion, which I shall discuss with my right hon. Friend the Prime Minister and others. I see no reason whatever that we should not be able to do that to assist the House, at the same time as we assist the general public by publishing the information on the website.

Gerry Sutcliffe: Will the Minister explain what the process will be when the public disagree with a ministerial decision that changes the business plan? That question comes to mind because of the decision to cut school sports partnerships, which will affect sports provision in schools throughout the country. The public have not had the opportunity to have any say on that.

Oliver Letwin: That is a very sensible question, and I am happy to explain that to the hon. Gentleman. The point of laying out these plans is so that people can see what we intend to do. Manifestly, as we move through time, external circumstances may change and decisions may be taken to change this or that-I hope not very much, but that could occur. Where it does, we are forcing ourselves to explain that, because it will become apparent-in the House in written statements, as my hon. Friend the Member for Banbury (Tony Baldry) suggested, and also on the website-that something we said we would do by a certain date we are not doing because we are doing something instead. We will have to explain that, and Select Committees and others will be able to interrogate us on it. That is what I mean by transparency.

Edward Leigh: Is not the danger that this "Yes Minister" Sir Humphrey language of horizon shift will disguise the real need for change? We should not just publish more reports that will go straight into the waste paper bin. We should, for instance, give professionals in our schools real power to manage the schools in the way they want, in hiring and firing staff, setting the curriculum and selecting pupils if they want. That would produce real change, not just more words from Whitehall.

Oliver Letwin: I very much agree with my hon. Friend that it is only by making the kinds of changes that he describes that we can really improve public services. That is why I have the good news for him that under the programme laid out in the Department for Education business plan my right hon. Friend the Secretary of State for Education will do exactly what my hon. Friend requests. That is why we have a programme of academies and free schools which gives those kinds of powers locally to the professionals on the ground. By doing that we enable parents and pupils, by choosing the schools of their own desire, to create real competitive pressure for excellence in the system. Combining that with the efforts to create a proper pupil premium means that the least advantaged will be most advantaged in our system, and the combination of those effects will be to give excellence and improvement for all.

Kevin Barron: The Minister says that Departments will publish a simple report on their progress towards meeting their commitments. What will happen if those commitments are often not met?

Oliver Letwin: What will happen is a series of things that are inconvenient for the responsible Ministers, rising to something that is rather more than inconvenient. In the first place, a report will be made, which will be available to everybody-no Minister likes to see such a thing appear in public. Secondly, the Minister involved will find himself having a discussion with my right hon. Friend the Chief Secretary and me to explain what has occurred- [I nterruption.] I do not know whether Labour Members want to know about this, but I am trying to explain it. The second thing that will happen is that the Minister will meet the Chief Secretary and me, and the permanent secretary will have a conversation with the head of the civil service. Finally, if the problem is still not resolved, the Secretary of State in question will have a meeting with the Prime Minister and the Deputy Prime Minister. This is a serious set of incentives; if one thinks about what it was like under the previous Government, or any previous Government, one realises that Ministers do not wish to go through that process and will therefore try to meet their objectives.

Robert Halfon: As a member of the Public Administration Committee I welcome the plans to shift some of this on to Select Committees. Will my right hon. Friend set out how the reports could be judged by those Committees and how their powers could be increased, so as to increase further the power of the legislature over the Executive?

Oliver Letwin: My hon. Friend is absolutely right that the Select Committees play a vital role in that respect. This approach puts vastly more power in the hands of the Select Committees, because the biggest obstacle to their power is, of course, lack of information-and this approach opens the whole thing up. This is not just a question of the structural reform plans and the dates, on which of course Committees can interrogate, as they can interrogate explanations when things go wrong; it is also about the details of the input costs-what we are putting in-the things that have been achieved on the ground and the outcomes, by which I mean how good it is for the final customer. That gives a Select Committee the ability to haul the relevant Secretary of State up before it and say, "Look, you said you were going to do this." The Committee could then say: "You did not do it"; "You did it, but at a greater cost than you said"; "You did it at the cost but it did not turn out to produce things"; or "It did produce things but the outcomes were not good enough." That is a very powerful interrogative tool. Hon. Members may ask why we would subject ourselves to this. The answer is because we think that it is how we will produce a better Government.

Louise Ellman: A very strong partnership between central and local government, with targets and with dedicated funding, has brought about a vast reduction in the number of people killed on our roads. Does this statement mean that such a successful partnership, with its targets, will be abandoned?

Oliver Letwin: No. As I think the hon. Lady knows, because she has great expertise in this area, one of the decisions that we made centrally during the spending review was to focus a very large part of total capital investment on the roads. That was done to reduce congestion, improve safety and achieve the kind of goals that she was describing. These plans are consistent with the spending review and with that focus on the need to improve our transport systems.

Julian Brazier: Does my right hon. Friend agree that the only way of achieving a movement of power from the top to the sharp end and a movement of the money from the Government monopoly out to the voluntary sector, which can very often deliver better value, is by very strong and transparent political direction?

Oliver Letwin: Yes, my hon. Friend is of course absolutely right. Part of the purpose of these plans is to ensure that we hold ourselves to fulfilling that vision. We recognise that there will be all sorts of pressures on the Government to recentralise, to re-control and to lunge for immediate interventions that will ostensibly achieve a particular result, and we know that we need to be kept to the straight and narrow of the vision of the transfer of power in this country from the centre out to the people.

Jonathan Edwards: Does the Minister not agree that today's trumpeting of the transparency agenda will ring hollow in Wales considering the actions of the Department for Culture, Media and Sport on S4C? The decision to fund the channel in future via the BBC was made without informing the S4C authority, the Welsh Government or even the Secretary of State for Wales on the eve of the comprehensive spending review.

Oliver Letwin: No, I do not accept that at all. This set of departmental plans will enable people to see on the face of it what we are going to do and when we are going to do it. Of course, there will be times when there are decisions involved in those plans that particular hon. Members do not like and there will be debate. We welcome that, we accept that and we are providing the means for people to have such debates.

Anne McIntosh: May I welcome the opportunity for Select Committees to scrutinise the business plans? This year in particular there is a lacuna with the annual departmental reports not being published. What will be the relationship of the business plan to such annual departmental reports in future?

Oliver Letwin: These business plans are a vastly superior document to the annual reports. Of course, there will continue to be the publication of the accounts of each Department, but I hope my hon. Friend will forgive me the indelicacy if I say that on some occasions the previous Government's annual reports from particular Departments contained a load of guff. One could not tell what the thing was about. I remember in opposition desperately struggling to find out what particular Departments were doing, and all I could get was a load of jargon. In these reports, one will be able to see the information-we are going to this, we will do it by this time, and this is the effect that we expect it will have. That is a jolly useful thing.

Michael Connarty: I am afraid that the Minister will have to go back to his drawing board for me. It would appear that he is so close to the ground that his horizon is very short indeed, and he might want to raise the stakes. On the point made by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), in local government there is the power to vote people out on close-to-the-ground programmes. What has he put in this plan to give local government real power to deliver, apart from a promised freeze in their council tax?

Oliver Letwin: I have such good news for the hon. Gentleman that it might lead to his crossing the Floor. Everything that he could desire is about to come in the localism Bill. We are going to give local government eye-watering increases in power that are stipulated in these proposals and that will be seen when the localism Bill is introduced. I hope that the hon. Gentleman will consistently argue and vote with us as we transfer powers of competence and powers of retention of business rates, as we transfer powers over planning to local neighbourhoods, as we transfer powers to keep council tax and as we transfer a series of additional powers to new mayors. The hon. Gentleman will have a dream day when he comes to grips with the localism Bill.

David Nuttall: In view of the fact that removing old regulations is necessary to boost economic growth, will the Minister confirm that, if a Department introduces a new regulation, it will be required to publish clearly which old regulation has been repealed?

Oliver Letwin: My hon. Friend can also have an early Christmas. We have instituted from 1 October the one in, one out rule. I should explain that it is more powerful than the rule that a regulation should be eliminated when a new one is introduced-it is that a regulation of equivalent cost to business should be eliminated, or indeed a collection of them with an equivalent cost to business. I want to take this opportunity to tell my hon. Friend and the House that since we introduced the one in, one out rule, the large flow of domestic regulation that was crossing my desk and others before that has somewhat diminished. Since 1 October, there has been one proposal.

Michael McCann: May I add my name to the list of Members who are mesmerised by the use of the language of horizon shifts? On the question of monthly reports, the Government have announced that about 500,000 public servants will lose their jobs under their plans. How many of those jobs will be saved in order to support the initiative that the Minister has announced today?

Oliver Letwin: The first thing that I should say is that the Government have not made any such announcement; the Government accept the Office for Budget Responsibility's forecast about the net effect on public sector employment. That does not mean anything like that number of current employees losing their jobs-nothing of the kind. Secondly, of course, had this initiative been introduced now by a Labour Government -to judge by what the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) said it might have been, and that is a delightful prospect-it would have been accompanied by various things. Large numbers of consultants would have been hired to set up complicated websites and there would have been large reviews, huge expenditure and so on-and probably great expenditure on advertising. The total that we have spent on this exercise to date is zero. We have not employed a single consultant, we are constructing the websites ourselves and we are not advertising, because we are a Government and not a magazine.

Julian Smith: Let me invoke the spirit of "Dragons' Den" and ask my right hon. Friend which Department has done the best business plan?

Oliver Letwin: I value far too highly my relationships with my colleagues to give any answer to my hon. Friend. All the business plans are excellent.

Catherine McKinnell: I welcome greater transparency in government. However, is the Minister aware that no business plan for the Law Officers' Department is available on the transparency website, and that members of the public cannot see details of ministerial and special adviser meetings, hospitality, gifts and foreign travel for the law officers? As shadow Solicitor-General, I should like to hear why the Solicitor-General and Attorney-General appear to be exempt from such requirements?

Oliver Letwin: I am grateful to the hon. Lady for her general welcome. I shall ask my right hon. and learned Friend the Attorney-General to look into the declaration, which should apply universally. The reason there is no structural reform plan for the Law Officers' Department is that we do not intend to bring about any structural reforms in the Department, because it is not possible to give its powers to someone else. It is one of the irreducible minima of Government activity, and it will continue with business as usual. These are plans not for business as usual but for fundamental structural reforms. Therefore, the hon. Lady will see no reference to the Law Officers' Department.

Nadhim Zahawi: Does my right hon. Friend the Minister agree that the greatest challenge to the coalition reforms is motivating people to behave in the right way? One of the ways in which we get people to compare and contrast how the coalition is delivering is by having this sort of transparency.

Oliver Letwin: I totally agree with my hon. Friend. It is all about people and the choices that they make. The fundamental failing of the method of doing business that prevailed for many years was not that it was ill-intentioned, because it was well intentioned, nor that it lacked energy, because it had a good deal of energy, but that it did not look into the reaction one can get from individuals when one does certain things in relation to them. This whole programme is founded on the presumption that when we trust people and give them power and make them accountable, they do the right thing, and that is what we are trying to do here.

Kevin Brennan: I thank the right hon. Gentleman for his statement, but will he have it translated into plain English and place a copy in the Library of the House. A milestone tells someone how far they have to go to reach a target destination, even if it is on a moveable horizon.

Oliver Letwin: The hon. Gentleman's plain English is wonderful to behold. I do not think that anyone has ever accused me of being any good at speaking English  [Laughter.] I do not intend to try to cure my ways now. I am trying to assist this Government to carry out the most important programme of structural reform that has happened in this country for many years so that they can improve our public services and make life better for our citizens, which matters an awful lot. The point about horizon shift is that it is serious. The previous Government caught themselves repeatedly on the hook of trying to achieve a result on Wednesday that they could show the public by Thursday. Often, the upshot was to achieve nothing whatsoever. We are saying that we will try to achieve things in the long term without trying to achieve publicity goals on the way, which is an important change.

Mary Macleod: Does my right hon. Friend agree that if we want to increase numeracy and literacy standards in our schools and reduce the gap in educational attainment between the rich and poor, we need to reduce bureaucracy, micro-management and targets and increase real local accountability.

Oliver Letwin: My hon. Friend is completely right, and that is the plan that is set out here. It applies not just to schools, but to hospitals and many of our other public services. The only way in which we can improve such services is to give the professionals the ability to get on with the job without micro-managing them through bureaucracies, and to hold them to account for the actions that they take and the successes that they achieve.

Tristram Hunt: Will the Minister explain how he squares taking power away from Whitehall and putting it in the hands of peoples and communities with the Government's plan to increase the number of Ministers by 10% relative to the size of the legislature, which is the representative of peoples and communities? Is this not the old Tory centralist state at work?

Oliver Letwin: The hon. Gentleman is clearly an apprentice of the hon. Member for West Bromwich East (Mr Watson), because that was the most marvellous manipulation of statistics. We propose to reduce the number of Members of Parliament, but the hon. Member for Stoke-on-Trent Central (Tristram Hunt) describes that as an increase in the proportion of Ministers to the number of Members of Parliament. That is a very strange way of describing the situation. We are keeping the number of Ministers constant in order to ensure that we can impose political will on the machine to get the fundamental reforms that give power out to the people of this country. That goal is far more important than particular numbers of Ministers.

Andrew Love: Following on from that question, the Minister has said several times this afternoon that he wants to increase power locally, yet the Government have just published a report on waste that implies that if they want to do something serious, they will need to recentralise powers, such as by forcing primary care trusts to act together and forcing local authorities to act together. Is there not a contradiction in those two things?

Oliver Letwin: In brief, no: we are not attempting to do what the hon. Gentleman describes. We believe that by placing the power of commissioning in the hands of general practitioners, by giving GPs and patients genuine choice over where patients go, and by making hospitals accountable on those choices by transforming them into foundation trusts, we can achieve the efficiencies that are needed in our health service through the medium of competition, which leads to the excellence that can be generated when professionals are able to run their own show. We are moving in exactly the opposite direction from that which the hon. Gentleman describes.

Paul Flynn: As the only time in nature when horizons actually shift is when a tsunami is on the way, can the House and the country expect to be inundated-the Minister gave an example today-with more bureaucracy, more gobbledegook and more management-speak?

Oliver Letwin: I respect the hon. Gentleman for his long work in areas such as drugs, but if he reads the plans he will find that they include serious efforts to change things for the better, such as through a payment by results-based drugs rehabilitation programme, for which, I think, he has long argued. That is not gobbledegook, bureaucracy or micro-management. It says to providers, "You know how to provide and we will pay you if you get people off drugs and back into the mainstream," and nothing could be more important to the people of our country than that.

Tom Watson: I think I understand what the Minister has announced: a series of tough, demanding and transparent moving-horizon, non-target, milestone reports. If he has, I fully support him, but to build on the point made by the hon. Member for Banbury (Tony Baldry), may I point out that publishing those reports on 22 websites will make things almost incomprehensible to citizens who wish to hold the Government to account? It would be better to place them in a single spot-perhaps directgov, the Cabinet Office website or data.gov.uk. Will the Minister also consider placing ministerial diaries and details on special advisers' hospitality in a single place on the same site?

Oliver Letwin: I am grateful to the hon. Gentleman for his brilliant translation. Incidentally, I have no doubt that he understood everything that I said because he understands everything that anyone says-he is very clever. Unfortunately, he is not very well informed because, as a matter of fact, we will enable people to go to a single place to get hold of all this stuff. Moreover, it will be put in a format that will enable people to mash it up and easily produce their own charts, and their own comparisons and analyses of everything that we issue. I anticipate that we will make more things transparent, including contracts for Government Departments right across the board, as well as all expenditure down to £25,000-and in local authorities down to £500 per item.

Points of Order

Hilary Benn: On a point of order, Mr Speaker. Following your reporting earlier of the certificate issued by the election court in the case involving the Oldham East and Saddleworth constituency, as the case raises important questions it would be sensible for the House to pause before considering a by-election writ, for two reasons.
	First, the matter is the subject of continuing legal proceedings by Mr Woolas, as you reported to the House at 2.30, and it seems only proper that the proceedings are allowed to conclude. Secondly-without wishing to stray at all into the details of the case, which we should not do because, as you have ruled, it is sub judice under the terms of the resolution passed by the House in 2001-if the judgment were to be overturned and the former Member were reinstated, but in the meantime we had held a by-election and another Member had been elected, we could end up with two Members of Parliament for one constituency, and that would hardly be desirable.
	It seems to me that the prudent and practical course of action is to allow the legal process to be concluded before the House considers the writ.

Mr Speaker: I am grateful to the right hon. Gentleman. He has made his points with great clarity.

George Young: Further to that point of order, Mr Speaker, and further to the statement that you made at 2.35, we on the Government Benches are content with the sequence of events that you outlined.

Mr Speaker: I am grateful to the Leader of the House for what he said.

Edward Leigh: Further to that-

Mr Speaker: In a moment. Patience is a great virtue. I could not possibly miss the hon. Gentleman.

Alistair Carmichael: Further to that point of order, Mr Speaker. The House will have noted your most helpful statement concerning the finding of the court that the election result in Oldham East and Saddleworth was void. Will you confirm, for the benefit of the House, that that means that there is currently no Member elected here to serve the people of Oldham East and Saddleworth? What assurance can you give the House and the people of that constituency that they will not be denied indefinitely, by untested legal proceedings, the representation to which they are entitled?

Mr Speaker: The hon. Gentleman, for whose point of order I am grateful, essentially raises two points. The answer to his first point is yes, as indicated in my statement when I referred to the need for Mr Woolas to vacate his seat from the date of the report, 5 November 2010. The answer to his second point is that of course I attach a premium, as I am sure the House as a whole will attach a premium, to a speedy resolution of the matter in the interests of Parliament, in the interests of Oldham East and Saddleworth constituency electorate, and in the interests of the country.
	It is precisely because I attach such a premium that I thought it would help the House if I caused inquiries to be made of the administrative court as to the urgency with which a judicial review application would be treated. Therefore, I reiterate both for the benefit of the hon. Gentleman and for all Members of the House that I did, indeed, cause such inquiries to be made, and I was advised that the administrative court judge has ordered an expedited hearing of the renewed application. He has done so precisely because he, too, considers it essential that the electorate of Oldham East and Saddleworth should know who is their Member of Parliament as soon as possible. I hope that is helpful to all with an interest in the matter.

Edward Leigh: Further to that point of order, Mr Speaker, and on a more general point, without in any way attempting-because you would rule me out of order if I did attempt-to get into the rights or wrongs of the case, massive constitutional issues are raised by it, which the House should debate. This is the first time in 99 years that a Member has been evicted. It is for the people, not the judges, to evict Members of Parliament.
	My worry is that if the judgment is allowed to stand, robust debate during elections will become virtually impossible. People will be terrified of attacking their opponents. For instance, what happens if a minor candidate for the BNP attacks a major party candidate? The latter would be frightened of attacking the former back because he might be disqualified. These are enormous constitutional issues, which we should discuss in the House.

Mr Speaker: I am grateful to the hon. Gentleman. I note his point. Tomorrow he will have served 27 years and five months in the House. Throughout that time he has expressed himself with great force and conviction, and today is no exception. We are grateful to him.

David Winnick: Further to that point of order, Mr Speaker. I am sorry that I did not catch your opening statement, but I have caught up with it since entering the Chamber. I in no way want to mention the details of the case, or defend or otherwise what is alleged, but, as you will no doubt know, the House has always been extremely reluctant to expel anyone. I know that this is not an expulsion made by a decision of this House, but the House has refused to expel Members over the years on the basis that this is not a club, despite what some people might say, and that if someone is elected it should be for the electorate to decide.
	There is therefore bound to be concern about whether a court-judges-should decide, and not the electorate. From the moment I heard of the decision, I felt some concern and anxiety that the decision about whether the electorate wanted that particular Member to serve had been taken out of their hands and given to the judges. Therefore, as the hon. Member for Gainsborough (Mr Leigh) said, the question does arise about whether in future circumstances an unsuccessful candidate will use any means to say in effect that what happened during the election was unfair, and to take the issue to the judges.

Mr Speaker: In so far as the latter part of the hon. Gentleman's point of order appeared to be a question, I hope that he will understand if I say that I will treat it as a rhetorical question. He has essentially raised a point very similar to that of the hon. Member for Gainsborough (Mr Leigh), and done so in earnest. That is respected, but I do not think that I need to respond to it. It is on the record, and that is important.

Ian Murray: On a point of order, Mr Speaker. The House will be aware that at the tail end of last week the Business Secretary referred the potential takeover of BSkyB to Ofcom. The reason most Members will be aware of that decision is that it was released to the media. Is it in order for that decision, although very welcome, not to be announced on the Floor of this House?

Mr Speaker: No breach of order has occurred is the straight answer to the hon. Gentleman, to whom I am nevertheless grateful for giving me notice of his point of order. He has put his point on the record. The Procedure Committee is examining the general issue of ministerial statements to the House, and I suggest that he write to the Committee with this example as evidence. He will also know that oral questions to the Department will be answered on Thursday week.

Business of the House

Ordered,
	That, notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions, more than one stage of the Finance (No. 2) Bill may be taken at any sitting of the House.- (Mr Heath.)

Finance (No.2) Bill

Consideration of Bill, as amended in the Public Bill Committee

New Clause 1
	 — 
	Video game production

'Schedule [ Video Game Production] contains provision about tax relief for the production of video games.'.- (Mr Hanson.)
	 Brought up, and read the First time.

David Hanson: I beg to move, That the clause be read a Second time.

Mr Speaker: With this it will be convenient to discuss
	New schedule 2- Video Game Production -
	1 After section 1216 of CTA 2009, insert-

Part 15A
	 — 
	Video Game Production
	 — 
	Chapter 1
	 — 
	Introduction

Introductory
	1216A Overview of Part
	'(1) This Part is about video game production.
	(2) Sections 1216B to 1216G contain definitions and other provisions about interpretation that apply for the purposes of this Part. See, in particular, section 1216C which explains how a company comes to be treated as the video game production company in relation to a video game.
	(3) Chapter 2 is about the taxation of the activities of a video game production company and includes-
	(a) provision for the company's activities in relation to its video game to be treated as a separate trade, and
	(b) provision about the calculation of the profits and losses of that trade.
	(4) Chapter 3 is about relief (called "video game tax relief") which can be given to a video game production company by way of additional deductions to be made in calculating the profits or losses of the company's separate trade.
	(5) Chapter 4 is about the relief which can be given for losses made by a video game production company in its separate trade including provision for certain such losses to be transferred to other separate trades.
	(6) Chapter 5 provides-
	(a) for relief under Chapters 3 and 4 to be given on a provisional basis, and
	(b) for such relief to be withdrawn if it turns out that conditions that must be met for such relief to be given are not actually met.
	 Interpretation
	1216B "Video Game" etc
	'(1) This section applies for the purposes of this Part.
	(2) "Video Game" includes a game played by electronically manipulating images produced by a computer program on a display screen.
	(3) A video game is completed when it is first in a form in which it can reasonably be regarded as ready for copies of it to be distributed to the general public.
	1216C "Video game production company"
	'(1) For the purposes of this Part "video game production company" is to be read in accordance with this section.
	(2) There cannot be more than one video game production company in relation to a video game.
	(3) A company that (otherwise than in partnership)-
	(a) is responsible-
	(i) for design, programming and production of the video game, and
	(ii) for delivery of the completed video game,
	(b) is actively engaged in production planning and decision-making during design and programming, and
	(c) directly negotiates, contracts and pays for rights, goods and services in relation to the video game,
	is the video game production company in relation to the video game.
	(4) If there is more than one company meeting the description in subsection (3), the company that is most directly engaged in the activities referred to in that subsection is the video game production company in relation to the video game.
	(5) If there is no company meeting the description in subsection (3), there is no video game production company in relation to the video game.
	(6) A company may elect to be regarded as a company which does not meet the description in subsection (3).
	(7) The election-
	(a) must be made by the company by being included in its company tax return for an accounting period (and may be included in the return originally made or by amendment), and
	(b) may be withdrawn by the company only by amending its company tax return for that accounting period.
	(8) The election has effect in relation to video games which commence design in that or any subsequent accounting period.
	1216D "Video game-making activities" etc
	'(1) In this Part "video game-making activities", in relation to a video game, means the activities involved in design, programming and production of the video game.
	(2) The Treasury may make regulations to-
	(a) amend subsection (1),
	(b) provide that specified activities are or are not to be regarded as video game-making activities or as video game-making activities of a particular description, and
	(c) provide that, in relation to a specified description of video game, references to video game-making activities of a particular description are to be read as references to such activities as may be specified.
	"Specified" means specified in the regulations.
	1216E "Production expenditure", "core expenditure" and "limited-budget video game"
	'(1) In this Part, in relation to a video game- "production expenditure" means expenditure on video game-making activities in connection with the video game, and "core expenditure" means the total costs that relate specifically to the producing and developing of the video game up to the point of commercial release.
	(2) For the purposes of this Part a "limited-budget video game" is a video game whose core expenditure is £3 million or less.
	(3) In determining if a video game is a limited-budget video game, any core expenditure that-
	(a) is incurred by a person under or as a result of a transaction entered into directly or indirectly between that person and a connected person, and
	(b) might have been expected to have been of a greater amount ("the arm's length amount") if the transaction had been between independent persons dealing at arm's length, is treated as having been of an amount equal to the arm's length amount.
	1216F "UK expenditure" etc
	'(1) In this Part "UK expenditure", in relation to a video game, means expenditure on goods or services that are used or consumed in the United Kingdom.
	(2) Any apportionment of expenditure as between UK expenditure and non-UK expenditure for the purposes of this Part is to be made on a just and reasonable basis.
	(3) The Treasury may by regulations amend subsection (1).
	1216G "Company tax return"
	In this Part "company tax return" has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1)).

Chapter 2
	 — 
	Taxation of Activities of Video Game Production Company

Separate video game trade
	1216H Activities of video game production company treated as a separate trade
	'(1) This Chapter applies for corporation tax purposes to a company that is the video game production company in relation to a video game.
	(2) The company's activities in relation to the video game are treated as a trade separate from any other activities of the company (including any activities in relation to any other video game).
	(3) In this Chapter the separate trade is called "the separate video game trade".
	(4) The company is treated as beginning to carry on the separate video game trade-
	(a) when design begins, or
	(b) if earlier, when any income from the video game is received by the company.
	1216I Calculation of profits or losses of separate video game trade
	'(1) This section applies for the purpose of calculating the profits or losses of the separate video game trade.
	(2) For the first period of account the following are brought into account-
	(a) as a debit, the costs of the video game incurred (and represented in work done) to date, and
	(b) as a credit, the proportion of the estimated total income from the video game treated as earned at the end of that period.
	(3) For subsequent periods of account the following are brought into account-
	(a) as a debit, the difference between the amount of the costs of the video game incurred (and represented in work done) to date and the corresponding amount for the previous period, and
	(b) as a credit, the difference between the proportion of the estimated total income from the video game treated as earned at the end of that period and the corresponding amount for the previous period.
	(4) The proportion of the estimated total income treated as earned at the end of a period of account is given by- C / T x I where- C is the total to date of costs incurred (and represented in work done), T is the estimated total cost of the video game, and I is the estimated total income from the video game.
	 Supplementary
	1216J Income from the video game
	'(1) References in this Chapter to income from the video game are to any receipts by the company in connection with the making or exploitation of the video game.
	(2) This includes-
	(a) receipts from the sale of the video game or rights in it,
	(b) royalties or other payments for use of the video game or aspects of it (for example, characters or music),
	(c) payments for rights to produce games or other merchandise, and
	(d) receipts by the company by way of a profit share agreement.
	(3) Receipts that (apart from this subsection) would be regarded as of a capital nature are treated as being of a revenue nature.
	1216K Costs of the video game
	'(1) References in this Chapter to the costs of the video game are to expenditure incurred by the company on-
	(a) video game-making activities in connection with the video game, or
	(b) activities with a view to exploiting the video game.
	(2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.
	(3) Expenditure that (apart from this subsection) would be regarded as of a capital nature only because it is incurred on the creation of an asset (the video game) is treated as being of a revenue nature.
	1216L When costs are taken to be incurred
	'(1) For the purposes of this Chapter costs are incurred when they are represented in the state of completion of the work in progress.
	(2) Accordingly-
	(a) payments in advance of work to be done are ignored until the work has been carried out, and
	(b) deferred payments are recognised to the extent that the work is represented in the state of completion.
	(3) The costs incurred on the video game are taken to include an amount that has not been paid only if it is the subject of an unconditional obligation to pay.
	(4) If an obligation is linked to income being earned from the video game, no amount is to be brought into account in respect of the costs of the obligation unless an appropriate amount of income is or has been brought into account.
	1216M Pre-trading expenditure
	'(1) This section applies if, before the company began to carry on the separate video game trade, it incurred expenditure on development of the video game.
	(2) The expenditure may be treated as expenditure of the separate video game trade and as if incurred immediately after the company began to carry on that trade.
	(3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.
	(4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.
	1216N Estimates
	Estimates for the purposes of this Chapter must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.

Chapter 3
	 — 
	Video Game Tax Relief

Introductory
	1216O Availability and overview of video game tax relief
	'(1) This Chapter applies for corporation tax purposes to a company that is the video game production company in relation to a video game.
	(2) Relief under this Chapter ("video game tax relief") is available to the company if the conditions specified in the following sections are met in relation to the video game-
	(a) section 1216P (intended for commercial release),
	(b) section 1216Q (British video game), and
	(c) section 1216R (UK expenditure).
	(3) Video game tax relief is given by way of additional deductions (see sections 1216S and 1216T).
	(4) Section 1216U contains provision about unpaid costs and artificially inflated claims.
	(5) In this Chapter "the separate video game trade" means the company's separate trade in relation to the video game (see section 1216H).
	(6) See Schedule 18 to FA 1998 (in particular, Part 9D) for information about the procedure for making claims for video game tax relief.
	 Conditions of relief
	1216P Intended commercial release
	'(1) The video game must be intended for commercial release.
	(2) For this purpose-
	(a) "commercial release" means distribution to the paying public, and
	(b) a video game is not regarded as intended for commercial release unless it is intended that a significant proportion of the earnings from the video game should be obtained by such distribution.
	(3) Whether this condition is met is determined for each accounting period of the company during which video game-making activities are carried on in relation to the video game, in accordance with the following rules.
	(4) If at the end of an accounting period the video game is intended for commercial release, the condition is treated as having been met throughout that period (subject to subsection (5)(b)).
	(5) If at the end of an accounting period the video game is not intended for commercial release, the condition-
	(a) is treated as having been not met throughout that period, and
	(b) cannot be met in any subsequent accounting period.
	This does not affect any entitlement of the company to relief in an earlier accounting period for which the condition was met.
	1216Q British video game
	'(1) Subject to subsection (2), a video game is a British video game for the purposes of this Part if it achieves a minimum of 19 points out of a maximum of 37 from the following table, with a minimum of 9 points being obtained in sections A and B:
	
		
			 A Cultural Content Number of points 
			 A1 The video game is based on locations in Europe (including fictionalised versions of locations in Europe) or on peoples of Europe. From 0 to 4 points 
			 A2 The video game is inspired by or based upon: (i) European underlying material (such as a film, a book or artistic work;or(ii) a sport (or sports) that originated in Europeor(iii) an event (or events) held (or previously held) within Europe;or(iv) any other European subject matter. From 0 to 4 points 
			 A3 The in-video game dialogue and in-video game text is mainly in the English language. 2 points 
			 B Cultural Contribution  
			 B1 The video game is an original video game (as opposed to being a sequel to a previous video game). 3 points 
			 B2 The video game is based on or strongly features a narrative (as opposed to being a purely abstract or non-linear video game). From 0 to 4 points 
			 B3 The video game incorporates any clear technical or creative innovations such as innovations in: (i) gameplay; (ii) graphics; (iii) user interface; (iv) artificial intelligence, audio or physics; or (v) online or multiplayer functionality. From 0 to 4 points 
			 B4 The video game represents or reflects: (i) diverse European culture;or(ii) European heritage;or(iii) European creativity. From 0 to 4 points 
			 C Cultural Hubs  
			 C1 At least 50 per cent. of the production budget in incurred within the UK. From 0 to 4 points 
			 C2 The in-video game text is translated into at least two other official languages of the EEA. 2 points 
			 D Cultural Practitioners  
			 D1 Executive Producer. 1 point 
			 D2 Lead Programmer. 1 point 
			 D3 Lead Artist. 1 point 
			 D4 Scriptwriter. 1 point 
			 D5 Lead Designer. 1 point 
			 D6 Lead music and audio composer. 1 point 
			  Total Achievable Points 37 points 
		
	
	(2) Notwithstanding the above, a video game is not a British Video Game if it is of a pornographic nature or features extreme violence.
	1216R UK expenditure
	'(1) At least 25 per cent. of the core expenditure on the video game incurred must be UK expenditure.
	(2) The Treasury may by regulations amend the percentage specified in subsection (1).
	 Additional deductions
	1216S Additional deduction for qualifying expenditure
	'(1) If video game tax relief is available to the company, it may (on making a claim) make an additional deduction in respect of qualifying expenditure on the video game.
	(2) The deduction is made in calculating the profit or loss of the separate video game trade.
	(3) In this Chapter "qualifying expenditure" means core expenditure on the video game that falls to be taken into account under Chapter 2 in calculating the profit or loss of the separate video game trade for tax purposes.
	(4) The Treasury may by regulations-
	(a) amend subsection (3), and
	(b) provide that expenditure of a specified description is or is not to be regarded as qualifying expenditure.
	1216T Amount of additional deduction
	'(1) For the first period of account during which the separate video game trade is carried on, the amount of the additional deduction is given by- E x R where- E is-
	(a) so much of the qualifying expenditure as is UK expenditure, or
	(b) if less, 80 per cent. of the total amount of qualifying expenditure, and
	R is the rate of enhancement (see subsection (3)).
	(2) For any period of account after the first, the amount of the additional deduction is given by - (E x R) - P where-
	E is-
	(a) so much of the qualifying expenditure incurred to date as is UK expenditure, or
	(b) if less, 80 per cent. of the total amount of qualifying expenditure incurred to date,
	R is the rate of enhancement (see subsection (3)), and P is the total amount of the additional deductions given for previous periods.
	(3) The rate of enhancement is-
	(a) for a limited-budget video game, 100, and
	(b) for any other video game, 80 per cent.
	(4) The Treasury may by regulations amend the percentage specified in subsection (1) or (2).
	 Miscellaneous
	1216U No account to be taken of amount if unpaid
	'(1) In determining for the purposes of this Chapter the amount of costs incurred on a video game at the end of a period of account, ignore any amount that has not been paid 4 months after the end of that period.
	(2) This is without prejudice to the operation of section 1216L.
	1216V Artificially inflated claims for additional deduction or video game tax credit
	'(1) So far as a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be ignored in determining for any period any additional deduction which a company may make under this Chapter.
	(2) Arrangements are entered into wholly or mainly for a disqualifying purpose if their main object, or one of their main objects, is to enable a company to obtain an additional deduction under this Chapter to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.
	(3) "Arrangements" includes any scheme, agreements or understanding, whether or not legally enforceable.

Chapter 4
	 — 
	Video Game Losses

1216W Application of sections 1216X and 1216Y
	'(1) Sections 1216X and 1216Y apply to a company that is the video game production company in relation to a video game.
	(2) In those sections- "the completion period" means the accounting period of the company-
	(a) in which the video game is completed, or
	(b) if the company does not complete the video game, in which it abandons video game-making activities in relation to the video game,
	"loss relief" includes any means by which a loss might be used to reduce the amount in respect of which the company, or any other person, is chargeable to tax,
	"pre-completion period" means an accounting period of the company before the completion period, and
	"the separate video game trade" means the company's separate trade in relation to the video game (see section 1216H).
	1216X Restriction on use of losses while video game in production
	'(1) This section applies if in a pre-completion period a loss is made in the separate video game trade.
	(2) The loss is not available for loss relief except to the extent that it may be carried forward under section 45 of CTA 2010 to be set against profits of the separate video game trade in a subsequent period.
	1216Y Use of losses in later periods
	'(1) This section applies to the following accounting periods of the company ("relevant later periods")-
	(a) the completion period, and
	(b) any subsequent accounting period during which the separate video game trade continues.
	(2) Subsection (3) applies if a loss made in the separate video game trade is carried forward under section 45 of CTA 2010 from a pre-completion period to a relevant later period.
	(3) So much (if any) of the loss as is not attributable to video game tax relief (see subsection (6)) may be treated for the purposes of loss relief as if it were a loss made in the period to which it is carried forward.
	(4) Subsection (5) applies if in a relevant later period a loss is made in the separate video game trade.
	(5) The amount of the loss that may be-
	(a) set against other profits of the same or an earlier period under section 37 of CTA 2010, or
	(b) surrendered as group relief under Part 5 of that Act,
	is restricted to the amount (if any) that is not attributable to video game tax relief (see subsection (6)).
	(6) The amount of a loss in any period that is attributable to video game tax relief is calculated by deducting from the total amount of the loss the amount there would have been if there had been no additional deduction under Chapter 3 in that or any earlier period.
	(7) This section does not apply to a loss to the extent that it is carried forward or surrendered under section 1216Z.
	1216Z Terminal losses
	'(1) This section applies if-
	(a) a company ("company A") is the video game production company in relation to a qualifying video game,
	(b) company A ceases to carry on its separate trade in relation to that video game ("trade X") (see section 1216H), and
	(c) if company A had not ceased to carry on trade X, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of trade X in a later period ("the terminal loss").
	(2) If on cessation of trade X company A-
	(a) is the video game production company in relation to another qualifying video game, and
	(b) is carrying on its separate trade in relation to that video game ("trade Y"), it may (on making a claim) make an election under subsection (3).
	(3) The election is to have the terminal loss (or part of it) treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade Y of the first accounting period beginning after the cessation and so on.
	(4) Subsection (5) applies if on cessation of trade X-
	(a) there is another company ("company B") that is the video game production company in relation to a qualifying video game,
	(b) company B is carrying on its separate trade in relation to that video game ("trade Z"), and
	(c) company B is in the same group as company A for the purposes of Part 5 of CTA 2010 (group relief).
	(5) Company A may surrender the terminal loss (or a part of it) to company B.
	(6) On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of trade Z of the first accounting period beginning after the cessation and so on.
	(7) The Treasury may, in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6), make provision by regulations corresponding, subject to such adaptations or other modifications as appear to them to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).
	(8) "Qualifying video game" means a video game in relation to which the conditions for video game tax relief are met (see section 1216O(2)).

Chapter 5
	 — 
	Provisional Entitlement to Relief

1216AA Introduction
	'(1) In this Chapter-
	"the company" means the video game production company in relation to a video game,
	"the completion period" means the accounting period of the company-
	(a) in which the video game is completed, or(b) if the company does not complete the video game, in which it abandons video game-making activities in relation to it,
	"interim accounting period" means any earlier accounting period of the company during which video game-making activities are carried on in relation to the video game,
	"the separate video game trade" means the company's separate trade in relation to the video game (see section 1216H), and
	"special video game relief" means-
	(a) video game tax relief, or(b) relief under section 1216Z (transfer of terminal losses from one qualifying video game to another).
	(2) The company's company tax return for the completion period must state that the video game has been completed or that the company has abandoned video game-making activities in relation to it (as the case may be).
	1216AB The UK expenditure condition
	'(1) The company is not entitled to special video game relief for an interim accounting period unless-
	(a) its company tax return for the period states the amount of planned core expenditure on the video game that is UK expenditure, and
	(b) that amount is such as to indicate that the condition in section 1216R (the UK expenditure condition) will be met on completion of the video game.
	If those requirements are met, the company is provisionally treated in relation to that period as if that condition was met.
	(2) If such a statement is made but it subsequently appears that the condition will not be met on completion of the video game, the company-
	(a) is not entitled to special video game relief for any period for which its entitlement depended on such a statement, and
	(b) must amend accordingly its company tax return for any such period.
	(3) When the video game is completed or the company abandons video game-making activities in relation to it (as the case may be), the company's company tax return for the completion period must be accompanied by a final statement of the amount of the core expenditure on the video game that is UK expenditure.
	(4) If that statement shows that the condition in section 1216R is not met, the company-
	(a) is not entitled to special video game relief for any period, and
	(b) must amend accordingly its company tax return for any period for which such relief was claimed.
	1216AC Video game tax relief on basis that video game is limited-budget video game
	'(1) The company is not entitled to video game tax relief for an interim accounting period on the basis that the video game is a limited-budget video game unless-
	(a) its company tax return for the period states the amount of planned core expenditure on the video game, and
	(b) that amount is such as to indicate that the condition in section 1216E(2) (definition of "limited-budget video game") will be met on completion of the video game.
	In that case, the video game is provisionally treated in relation to that period as if that condition was met.
	(2) If it subsequently appears that the condition will not be met on completion of the video game, the company-
	(a) is not entitled to video game tax relief for any period on the basis that the video game is a limited-budget video game, and
	(b) must amend accordingly its company tax return for any such period for which such relief has been claimed on that basis.
	(3) When the video game is completed or the company abandons video game-making activities in relation to it (as the case may be), the company's company tax return for the completion period must be accompanied by a final statement of the core expenditure on the video game.
	(4) Subsection (5) applies if that statement shows-
	(a) that the video game is not a limited-budget video game, or (as the case may be)
	(b) that, having regard to the proportion of work on the video game that was completed, the video game would not have been a limited-budget video game had it been completed.
	(5) The company-
	(a) is not entitled to video game tax relief for any period on the basis that the video game is a limited-budget video game, and
	(b) must amend accordingly its company tax return for any period for which such relief was claimed on that basis.
	1216AD Time limit for amendments and assessments
	Any amendment or assessment necessary to give effect to the provisions of this Chapter may be made despite any limitation on the time within which an amendment or assessment may normally be made.".
	2 In Part 9D of Schedule 18 to the Finance Act 1998, references to film should also include references to video game.'.

David Hanson: As the House will be aware, my hon. Friend the Member for Wallasey (Ms Eagle) referred on Second Reading to the fact that we want to bring forward a provision on tax relief in order to help to support the video games industry. Although, undoubtedly, new clause 1 would not do that in every respect, I want to put it before the House, so that we can have an in-principle debate about video game industry tax relief. The new clause provides an opportunity for the House to consider enhanced relief based on UK expenditure on video game production.
	The new clause suggests that we might consider qualified tax relief for the video game industry, and that it should be based on strict criteria: the video game must be for commercial release; it must be a British video game, assessed on the basis of a points system; and it must meet a 25% UK expenditure threshold, whereby 25% of the total expenditure on the production and development of the video game is UK expenditure on goods or services. We intended to look at that issue, and I would have tabled a much more detailed new clause, but the advice was that we could not. I hope that I have, however, tabled sufficient proposed changes for the Government to consider bringing back at a future date, or supporting the principle of, tax relief for this vital sector in the United Kingdom.
	The video games industry is a real success story for British industry, and we look to support it in detail. As I am sure that the Minister is aware, research from TIGA, which represents the gaming industry, shows that over a five-year period games tax relief could create or save about 3,500 graduate-level jobs, secure £450 million-plus in new and saved development expenditure, and generate about £415 million in new and saved tax relief. I hope that it would do so in a way that ensures that the cost to the Treasury amounts to about £192 million over five years, which would be more than paid for by the jobs and investment, and encouragement to the industry, that that would develop in due course.
	My hon. Friends the Members for Dundee West (Jim McGovern), for Liverpool, Wavertree (Luciana Berger) and for West Bromwich East (Mr Watson) have been very vocal in supporting such a tax relief. I hope that the Minister will consider it in principle, so that we can begin to develop a cross-party consensus in due course.

John Redwood: If it works for this industry, why does it not work for others? Why is the right hon. Gentleman limiting it to this one industry?

David Hanson: Our proposal is based on an existing tax relief for the film industry, which has been very successful in helping to generate extra revenue for that industry and keeping production in the United Kingdom. I am sure that the right hon. Gentleman will be interested to know that the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage (Mr Vaizey) said this on 13 April-I accept that that was in the middle of an election campaign, so we will take these words as being from that particular time:
	"We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years."
	In the spirit of cross-party co-operation, the hon. Member for Bath (Mr Foster), who then held the esteemed position of Liberal Democrat shadow spokesman for Culture, Media and Sport-the Lib Dem spokesmen are now all subsumed into one entity-said:
	"Liberal Democrats support the introduction of a Games Tax Relief. Following consultation on the details, we would implement the Relief as soon as possible."
	At that time, my hon. Friend the Member for Wallasey, who is shadow Chief Secretary, the then shadow Culture Minister, who is now a Minister, and the then Liberal Democrat spokesperson supported this proposal, as did I. Since then, however, it has vanished without trace-until today's debate.
	The right hon. Member for Wokingham (Mr Redwood) may oppose tax reliefs generally. However, such a relief has been proved to work in the film industry to date. Unfortunately, the Chancellor of the Exchequer said in his Budget:
	"we will not go ahead with the poorly targeted tax relief for the video games industry."-[ Official Report, 22 June 2010; Vol. 175, c. 512.]
	I want to test with the Minister whether that is an in-principle opposition to tax relief for the video games industry. If not, is his opposition based on a poorly designed scheme by the previous Labour Government or on poorly targeted suggestions in today's proposals? Is there, in principle, room for discussion, so that it would be possible for him to bring back, at some point, a tax relief that meets the objectives of the hon. Member for Bath, the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage and ourselves, and that would, I hope, help to support the video games industry?

John Redwood: Just to clarify the point, the right hon. Gentleman should know that I believe that lower tax rates result in more revenue. I am delighted to see that he is now a recruit to that cause, but I suggest that he should not limit it to one industry.

David Hanson: We are happy to consider on a case-by-case basis whether tax relief helps to generate employment and earn business and crucially-I think that this is the right hon. Gentleman's point-to maintain that business in the United Kingdom rather than transferring it overseas. The film tax credit has proved that that can be the case, and I suggest in the new clause that we consider it for the video games industry.

Jim McGovern: My right hon. Friend mentioned the British film industry. Is he aware that figures provided by TIGA, which represents the computer games industry, suggest that the cost of a tax break for computer games would be £55 million, whereas the film industry already gets a £110 million break, even though the revenue generated by both is much the same?

David Hanson: Indeed, and TIGA-my hon. Friend says "tiger"; I say "teega", but we both mean the same thing-has estimated that we can make savings to the Treasury by investing in a tax relief up front and keeping jobs in this country. That is the crucial point.

Stewart Hosie: rose-

David Hanson: I know that the industry is important to Scotland, so following my hon. Friend the Member for Dundee West, I give way to the hon. Member for Dundee East (Stewart Hosie).

Stewart Hosie: The right hon. Gentleman was right to mention the Chancellor's argument that the proposed tax break was poorly targeted, but he will be aware of the evidence given to the Scottish Affairs Committee by Edward Troup of the Revenue. He said:
	"I am not sure I would say it was poorly targeted. It was targeted at the video games industry...it was perfectly designable if we had continued with it",
	and so on and so forth. Does not that experience from the coal face, from inside the Revenue, directly contradict the argument that the Government used to do away with the plan?

David Hanson: The hon. Gentleman has effectively read out the next section of my speech. I have indeed examined what was said in the Scottish Affairs Committee. The Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage, said at the same meeting on 20 October:
	"It may be that we can revisit a video games tax break in the future."
	Was he speaking for the Department of Culture, Media and Sport or for the Treasury? I presume that the Chancellor was speaking for the Treasury in ruling out the idea, but three months later his Minister in the DCMS said that we should consider it in future.
	I do not necessarily wish to press the new clause to a Division, but I have tabled it so that the Exchequer Secretary can clarify whether, in the next 12 months or two years, he can meet the objectives that my hon. Friends the Members for Dundee West, for West Bromwich East and for Liverpool, Wavertree, and the hon. Member for Dundee East, have championed so strongly.

Tom Watson: The important point about the new clause is the unique position of the video games industry. It has the potential for explosive growth and to create far more high-level, highly paid, highly skilled jobs in the UK. Yet its competitors, with a fiendish interpretation of international competition rules, are picking off the very best designers and developers from UK production shops one by one. The industry worked long and hard with the Treasury to build a robust model for a specific rate to allow the industry to grow over the coming years. That is why hon. Members are so concerned-many jobs are at risk if the new clause is not accepted.

David Hanson: My hon. Friend makes the important point that those are high-skilled, highly technical jobs that will bring investment to this country. They are intellectual capacity jobs that are helping to grow the areas of our international markets that we need to grow.
	To follow up on what the hon. Member for Dundee East said, Edward Troup, the managing director of budget, tax and welfare at the Treasury, said to the Scottish Affairs Committee:
	"There would be issues; there would be boundary issues,"
	but crucially, he continued, "but it would work." I am not trying to make political capital out of the matter, but if it is proved that the tax break would work-meaning that it can be applied, can deliver, will keep jobs in this country, will grow business and will help resources be reinvested in the British economy-will the Exchequer Secretary be willing to accept the principle and introduce an appropriate clause in some future Finance Bill?
	If it is found that the tax break would work but the Exchequer Secretary will not introduce it, I will have to presume that he is not interested in doing so, rather than that he is concerned about its applicability and workability. If so, he is on an entirely different page from the one that the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage was on in April, that the Chancellor was on before the general election and that the hon. Member for Bath, who is part of the coalition, was on at that time.

Charlie Elphicke: The right hon. Gentleman makes a perennial point that shadow Ministers make, to which actual Ministers presumably perennially say no. May I point out to him the table in proposed new section 1216Q of the Corporation Tax Act 2009, in new schedule 2? It mentions points being given for at least 50% of a game's production budget being incurred in the UK, and proposed new section 1216R states what the percentage of UK expenditure has to be. Will he confirm that that does not conflict with any European law provision?

David Hanson: I have taken advice in drafting the new clause, and my advice is that it is workable and applicable, although I have had to leave out certain aspects. My purpose is not to force this particular model on the Treasury, but to use the new clause as a debating point, so that the Treasury can respond to the principle and decide whether this is a good proposal that will help matters, bring investment back to the United Kingdom and be supportive. I would, potentially, be happy to withdraw the new clause at the end of the debate, and I am happy to listen to what the Minister says, but I want to get to the nub of the issue.
	The Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage, the hon. Members for Bath and for Dundee East, who speaks for the Scottish National party, my hon. Friend the Member for Dundee West and Labour Front Benchers all think that some form of games tax relief to help maintain the industry in the United Kingdom would be a good thing. All I want today is for the Minister to say, "Yes, I agree with that general principle. Over a period of time, I will look at how we make this proposal workable and how we bring it back in a future Budget or Finance Bill." Indeed, he could say today that he is happy with the proposals and that the Government will look at them again in the near future in whatever format they choose. It is important to get that on the table.
	Dr Richard Wilson, TIGA's chief executive, has set out his view that we will potentially lose jobs. He said:
	"the UK is losing out on jobs and investment because of the absence of Games Tax Relief.
	High-skilled jobs could be created in Manchester and Warrington. Instead they are being created in Montreal."
	He says that that is particularly because our
	"key competitors, particularly Canada, have tax breaks for games production. The UK does not."
	Others who comment on these matters, such as Danny Bilson, THQ's vice-president for core game brands, has said:
	"The talent in the UK is extraordinary...We have a studio up in Warrington that's an excellent studio...but I'm sorry, it's...about money at the end of the day."
	We need to ensure that we have the support for such things. That is the reality of the market. World-leading publishers recognise that we have an asset, which it has taken years to build up and which is worth hundreds of millions of pounds, but it will go abroad if we do not compete on the same level as our Canadian colleagues. In France, there is a 20% tax reduction for video games, and tax provisions in Canada have driven up staff numbers by 43%, but in the United Kingdom we have seen the head count start to decline over the past few years.
	I do not want to go into great detail or to take up the House's time. I simply want to tell the Minister that there is real scope for these proposals. There is scope to develop the UK film tax credit model and to use it for the UK video game tax model. We can ensure that we help to grow the sector, and we can meet the commitments that colleagues made during the general election campaign. I tabled the new clause so that we could hear whether the Minister is still of the view that there is no scope for such proposals or whether he could look at the issue in detail and bring back proposals in due course. I commend the new clause to the House.

Mark Field: The video games industry is very important. Its spiritual home is, in part, in my constituency, in places such so Soho and Covent Garden-

Stephen Pound: Hardly spiritual.

Mark Field: They are the spiritual home of so many things, as I am sure that the Opposition Whip would agree.
	I have spoken on many occasions to leading lights in the video games industry, and they outlined many of the concerns that have been expressed by the hon. Members for Dundee West (Jim McGovern), for Dundee East (Stewart Hosie) and for West Bromwich East (Mr Watson). There is a risk that a significant amount of business is leaving these shores because of a perception, and indeed the reality, that there is unfair tax and regulatory competition from further afield.
	One of my concerns, which I expressed before the election to leading lights in the video games industry, is that trying to emulate the film tax credit is not necessarily the right route down which to go. Back-Bench and Front-Bench veterans of Finance Bills going back a decade or more-you are one, Madam Deputy Speaker, from your time as a Minister, as am I from my time in opposition-will know of the concern that the film tax credit has had to be updated almost annually, because of the clear abuses and unintended consequences resulting from it. There was a sense that although the film business in this country benefited from it, there was a significant through-flow of cash that was not in the interests of either the Exchequer or the high-quality products of which our film industry has been rightly proud in decades gone by.

Stewart Hosie: Notwithstanding the hon. Gentleman's points about the film tax credit, I am sure that he will understand the business model around which the video games industry operates. A large amount of cash is spent in the development of games, but revenue drops off in the run-up to a new hardware offering or console being developed. The difficulties that the sector faces are exacerbated by the regular new hardware offerings. Does that not make a stronger case for some sort of assistance?

Mark Field: I accept that. There is also little doubt that we have some tremendously high-quality people working in this business. I must say, in parenthesis, that one difficulty is that hitherto we have had to import far too many such people from beyond these shores. I know that our university media studies industry is much discredited, but those media studies courses that are linked to the video games industry in particular often ensure that we get some of the brightest and best of the home-grown talent in our universities entering the industry.
	I take on board the concerns of the right hon. Member for Delyn (Mr Hanson), given that the issue before us has been in the ether for years. I would prefer not to rush into anything, although I hope that my hon. Friend the Minister will take on board the deep concerns expressed today so that we can come back, perhaps during next year's Finance Bill, with a workable model based on the proposals before us.
	I would like to put in a word not just for the video games industry, unique though its interests are in the minds of those who run and work in those businesses, but for the animation industry. It is a related industry within the media sphere, and faces many of the problems expressed by the hon. Member for Dundee East and businesses in the industry. The animation industry is deeply concerned that it is losing some of its brightest talent, and feels that-this is felt not just in the animation sector-it is facing unfair competition not only from the Canadian and French models, but from Ireland and, dare I say it, Scotland. It feels that it is losing out to a large degree. I would therefore like to see a clause that brings the video games industry, the animation industry and all these other industries under a single protocol. Such a protocol could operate well and effectively, so I hope that the Treasury will consider one in next year's Finance Bill.

Jim McGovern: The hon. Gentleman has indicated that part of the computer games industry is based in his constituency-in fact, he seemed to indicate that the industry originated there. Does he agree that a change of name or title is required? When people hear "computer games industry", they think of young lads between 15 and 30 sitting in front of a computer screen playing "APB" or "Grand Theft Auto", when in fact, as people who have visited Abertay university in Dundee will have seen, it is used in medical research, construction and architecture. Perhaps we need a change of focus, rather than continuing to call it the "video games industry".

Mark Field: The hon. Gentleman is right to make that important point, although it also raises the question of how we couch such a new clause and schedule in a future Finance Bill to ensure that it takes on board an industry that we want to encourage rather than see go much further afield. I am not a young lad of 15 or 30-or even of 46-so the industry has passed me by, but there is no doubt about the enthusiasm of the companies operating in this sphere. One of my biggest concerns is that all too often those companies have to employ programmers from eastern Europe and other parts of the world in order to get the relevant level of expertise. That is a regrettable state of affairs. None the less it is undoubtedly a thriving and enormous industry, in which we are cheek by jowl with the Japanese in terms of our expertise and export potential.
	I implore the Minister to take our concerns seriously. Now would not be the time to accept a proposal such as the one before us, but I hope that he will give sufficient comfort to Opposition Members to ensure that they do not press the matter to a vote. However, the issue is worth discussing at length today.

Sheila Gilmore: One thing that I have not understood-I have not understood it from either the debates that we had in the Public Bill Committee, on which I served, or the responses to the various parliamentary questions that have been asked about the video games industry and tax relief-is whether the objection is to the detail of previous proposals or this proposal, or whether there is a more fundamental objection about giving such a relief at all. At times, it seems to be suggested that it is not appropriate to give such a relief, but it would be extremely helpful to know which it was.
	If the issue is the detail or exactly how the proposal is to be implemented, that could be discussed further. However, targeting such an industry-or indeed any industries-might be felt to be inappropriate. In one answer given in the Chamber last week, the suggestion seemed to be that a lower rate of corporation tax generally would be sufficient, without targeting specific emerging industries. However, a tax relief is important to a growing industry in that it allows it to get off the ground and develop in the way that it needs to. People have already spoken about the cash-flow difficulties for sectors such as the video games industry, so it would be helpful if the Minister could clarify where the Government are on this issue and what their future plans might be.

John Redwood: I am delighted that the Opposition have highlighted the example of the video games industry. However, I fear that it is only one example among many of how we are at risk of losing talent, enterprise, jobs and business development in a number of areas because our rates of taxation are now not internationally competitive. It is interesting that the Opposition, who do not normally favour lower rates, have identified lower rates-or a lower tax imposition-as the answer in this case. I hope that they will think on these things more widely, because the combination of a high marginal rate of income tax and what is now quite a high rate of corporation tax by international standards is not a good combination in an intensely competitive world, where there has been a shock to overall demand and where we are having to fight for our commercial lives in world markets.
	From my point of view, there are a couple of problems with the proposals before us. The first is that going for 25% for British content is a low ambition. I would have thought that one would want a rather higher rate of British content if we were formulating some special treatment for the industry. There is also a problem with concentrating on the profits that a company generates, because some companies will be small businesses with talented entrepreneurs. They might have just one good game in them that earns them an awful lot of money in a short space of time. That is when high marginal rates on apparently high earnings-they become genuinely high earnings where it is possible to sustain them-could become quite an imposition, because those entrepreneurs might get caught in the year or two of their success, but find afterwards that they are no longer able to achieve that.
	The issue is therefore not just about corporation tax or profits tax; it can also be about income tax. I hope that the Minister will reassure us by saying something about how he sees our overall tax regime developing, in both corporation tax and income tax, because we have a general problem and we need to show the way to lower rates as quickly as possible in this very competitive world. I would also repeat to my hon. Friend the simple point that the evidence from the American and the British experiences is that when countries have been bold enough to cut rates on enterprise, income and profits, they have usually found their revenues increasing. It is quite obvious that the Government need a lot of extra revenue, so I would recommend that proposal to him.

David Gauke: New clause 1 and new schedule 2 seek to provide additional tax relief for companies producing video games. The measure was announced, but not implemented, by the previous Administration. As the Chancellor said in the emergency Budget statement, this tax relief for the video games industry is poorly targeted, which is why we have decided not to introduce it.
	The United Kingdom's video games industry is recognised as a world leader, having produced hugely successful games such as the "Grand Theft Auto" series, and has led to innovations in industries as diverse as defence and health care, as the hon. Member for Dundee West (Jim McGovern) pointed out. All that has been achieved without specific Government intervention for the sector through the tax system.
	We estimate that the relief proposed by the Opposition would cost some £40 million to £50 million a year-that was the costing for the previous Administration's proposal-and we believe that without strong evidence of a market failure in the games industry, it is difficult to justify spending that amount of money on such an intervention, particularly given the state of public finances.

Jim McGovern: At a recent meeting with the Minister, I told him that before the Budget that announced the intention to promote tax breaks, there were at least six ministerial visits to Dundee, which included the then Secretary of State for Scotland, Ministers from the Department for Business, Innovation and Skills, and the Department for Culture, Media and Sport, and the Chancellor. There was a lot of consultation before the then Chancellor eventually announced the decision on tax breaks. Will the Minister tell the House how many visits were made to Dundee before this Government's decision to withdraw them?

David Gauke: The circumstances facing us in the run-up to the June Budget were such that we wanted to introduce a more fundamental reform of corporation tax. In that Budget on 22 June, we announced a reduction in the main corporation tax rate from 28% to 24% over the next four years. In doing that, we wanted to show a sense of direction, to ensure that Britain was open for business, and that we were providing lower rates. Our approach is to have a broader base but lower rates rather than targeted intervention, unless there is clear evidence that intervention is the right approach.

Stewart Hosie: The Minister is being generous. He is paraphrasing the Green Book, which says that the Government will
	"prioritise spending which supports private sector growth and investment".
	Various forms of those words have been used since his party and the Liberal Democrats took office. Surely tax breaks that would cost perhaps £195 million and would deliver £415 million in tax receipts are precisely the sort of investment in precisely the sort of industry that would meet the Government's objectives.

David Gauke: We have heard the figures quoted by TIGA, but we do not accept the validity of that analysis because we feel that some of the assumptions underpinning those estimates are erroneous. The research commissioned by the industry implicitly assumes that the investment incentivised by the subsidy is entirely additional to the UK economy. In reality, it is likely that the relief will displace investment from elsewhere in the economy, so the net impact on total UK investment could be limited. For example, it is possible that such a tax subsidy would divert investment from more productive sectors to the detriment of the productivity of the UK economy as a whole.
	If Opposition Members are making the case that lower taxes always result in growth in the economy, I would listen with great interest and it would-my right hon. Friend the Member for Wokingham (Mr Redwood) made this point-be an interesting conversion to supply-side economics. I do believe, however, that the strongest economic case can be made for lower tax rates as a whole, across a broader base, as opposed to targeting some sectors, unless there is a strong case that there is some kind of market failure. We have not yet heard such a case being expressed in a way that we find persuasive, and that is why we decided not to proceed with video games tax relief.
	That is not to say that we do not wish to support British businesses-far from it; we do. It is vital that we have a strong private sector to drive the recovery, but we must support that growth in the right way. In the emergency Budget, the Government announced a major package of reforms to the business tax regime with the aim of creating the most competitive corporate tax system in the G20.

Mark Field: The Minister has twice referred to the concept of market failure. Did not the hon. Member for Dundee East (Stewart Hosie) make a compelling argument when he spoke about the very nature of this market? Perhaps we should be talking not about market failures but about the way in which the video games industry operates and the fact that its nature makes it susceptible to the kind of tax relief that we are looking for. The Minister is understandably, and rightly, sceptical about some of the figures being put out by TIGA, but a multiplier of nine seems pretty high. What level of multiplier would be so unacceptable as to allow this kind of relief to be put in place?

David Gauke: The TIGA analysis makes the assumption that everything achieved as a consequence of the relief would be additional to the economy. It does not appear to recognise that there would also be displacement, and that highly skilled graduates would not remain unemployed if they did not find work in the video games industry. We are therefore sceptical about the TIGA analysis. My hon. Friend makes his point well, however, and the nature and profile of the video games business clearly have some significance for his constituency, but we are as yet unconvinced of the necessity for the tax relief that was proposed by the previous Government, and that is proposed in the new clause.
	The Government's focus must be on providing a strong business environment for sectors across the board, including video games. Our reforms will reduce rates of corporation tax by four percentage points over the next four years, which means that the UK will continue to have the lowest main rate in the G7. This will improve our relative position significantly, compared with that of our competitors, after the years in which we have fallen behind. This will benefit companies across the economy, including those in the video games industry.

Stewart Hosie: My party welcomes the reduction in corporation tax; we believe that it is a good thing. However, some of the businesses that are creating video games are not big enough to pay corporation tax. Many of them are dependent on the annual allowances, but some of those have now gone, and one has been halved. So although I welcome the reduced corporation tax, the overall package will not necessarily help the start-up studios and small studios as they develop their games.

David Gauke: We have also reduced the small profits rate of corporation tax from 21% to 20%, when it was set to go up to 22%, and we have effectively reversed the jobs tax-the increase in national insurance contributions that would have hurt start-ups. We are also offering start-ups, including those in the hon. Gentleman's constituency, a national insurance contributions holiday for the first 10 employees, so there were plenty of positive policies for start-ups announced at the time of the Budget. Indeed, given the state of the public finances, it was a very pro-business, pro-growth Budget in the way that it set up proposals for lower taxes.
	On tax simplification, the Office of Tax Simplification earlier today announced the list of reliefs and exemptions within the tax system. When its work began in the summer, the general expectation was that there would be about 400 reliefs and exemptions; the total reached is 1,042 such reliefs and exemptions. Many play an important role within our tax system-I do not wish to decry that-but we have to think carefully about introducing new areas of complexity and new reliefs and exemptions, unless there is a strong case for doing so. Members have already made the case for video games, but the Government remain unconvinced.

Jim McGovern: Will the Minister give way?

David Gauke: I certainly will give way to the hon. Gentleman, who has been very active on this issue.

Jim McGovern: I thank the Minister for giving way again. He talks about hearing what has been said in the Chamber, but as far as I am aware he has not yet met Richard Wilson of TIGA. Like everyone else who mentions the organisation, I originally referred to it as "Teega" but Mr Wilson continually refers to it as "Tyga", and I assume that he knows better than I do. I believe the logo resembles a tiger, so there is a connection with the pronunciation there. Will the Minister agree to come to Dundee and I will arrange for Richard Wilson to be there? If figures are to be bandied about, with the Minister saying they are erroneous and Richard Wilson saying they are correct, it would be better if those two were in the same room at the same time to discuss the issue.

David Gauke: I am grateful for that invitation. I am sure it will be small comfort to the hon. Gentleman, but I will accept the pronunciation "Tyga" and concede that point. I am not sure that it would be terribly helpful if we were all in the same room to discuss these particular numbers. As I say, we are not convinced by the case made on these numbers. Of course, Members with constituencies that have a concentration of video game companies will want to make that case, but it is right for the Government to look at the economy as a whole and to bring forward policies that benefit all parts of the country and all sectors, including the video game sector. As I said in the meetings I have had with the hon. Member for Dundee West, there is no sense in which the Government are in any way anti-video games or think it is an antisocial issue or anything like that. It is question of economic efficiency and where we believe the role of Government can be best used-and that is in providing a favourable climate for businesses.
	I appreciate that the new clause and new schedule proposed by the right hon. Member for Delyn (Mr Hanson) are probing measures, but I would like to touch on a point made by my hon. Friend the Member for Dover (Charlie Elphicke). This relief is targeted at a specific sector and it would be considered to be state aid; as such, it would require notification to and approval from the European Commission. The new clause and new schedule would be effective from Royal Assent. As the Government would not be able to secure approval in such a short period, the provisions would create an illegal state aid. As I said, I understand that the amending provisions are probing, but the same issue applies to the previous Government's proposals-and they, too, would have required state aid approval, which is worth putting on the record.
	The new clause would create unjustified distortion and complexity in the corporate tax system. We do not think that such an intervention would represent good value for money for the Exchequer or be conducive to providing a simple and competitive tax system. The UK needs a tax system that supports all businesses, because it is the private sector across the board that will drive the recovery. I therefore ask the right hon. Gentleman to withdraw the new clause and new schedule.

David Hanson: I am grateful for the Minister's clarification of the Government's response. If we take into account the comments made by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), it is clear that the Government are not in favour of the principle of this type of tax relief rather than the practicalities of the suggestions in the amending provisions. I am disappointed about that. I remind the Minister again of what the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage (Mr Vaizey) said When asked during the election campaign whether the Conservative party was in favour of a games development tax break, he answered:
	"emphatically, 100 per cent in support for game tax breaks. No ifs, no buts."
	That does not appear to be the Government's position today, which disappoints me.
	Perhaps at this point I should declare that PricewaterhouseCoopers helped me to draw up the new clause. I shall register that in due course.
	I think that we need to reflect on this issue. The right hon. Member for Wokingham (Mr Redwood), the hon. Member for Cities of London and Westminster (Mr Field), the hon. Member for Dundee East (Stewart Hosie), my hon. Friend the Member for Dundee West (Jim McGovern), my hon. Friend the Member for West Bromwich East (Mr Watson) and, outside the Chamber, my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) have demonstrated great support for their industry. Many jobs depend on it, not least in the constituency of my hon. Friend the Member for Nottingham East (Chris Leslie). We must ensure that we do not transfer jobs to Canada, France and other countries just because of the impact of our tax regime on the industry, and just because-as has been pointed out-some companies do not qualify for the help that the Government have provided through capital gains tax relief owing to their size.
	I accept what the Minister has said today, which I interpret as a closed door, but I must tell him that Members, including those with constituency interests, will return to the issue. I hope that he will accept the suggestion of my hon. Friend the Member for Dundee West that it should be examined in detail, that he will meet representatives of the industry, in London if not in Dundee, and that he will consider discussing with those who are helping to create this wealth how we can ensure that we keep the jobs in the United Kingdom. I hope he will not allow that door to remain completely closed.
	I give the Minister notice that both Back Benchers and Front Benchers will return to the issue, so that we can all fulfil our manifesto and election pledges and, more important, protect the industry in the United Kingdom as a whole. Having said that, I beg to ask leave to withdraw the motion.
	 Motion and clause, by leave, withdrawn.

New Clause 2
	 — 
	Independent taxation and family benefits

'The Treasury shall, within six months of the passing of this Act, commission and publish an independent review of the implications of the operation of section 32 of the Finance Act 1988 (Married couples-abolition of aggregation of income) on methods of determining eligibility for family benefits including child benefit.'.- (Chris Leslie.)
	 Brought up, and read the First time.

Christopher Leslie: I beg to move, That the clause be read a Second time.
	New clause 2 would force the Treasury to come clean on its plans to withdraw child benefit from families with higher-rate taxpayers from January 2013, which will take £2.5 billion a year from those families from 2014-15 onwards.
	Ever since the Chancellor announced the policy of means-testing child benefit a month ago at the Conservative party conference, the policy has gradually unravelled. The Treasury has struggled to spell out exactly how it will implement the idea-especially as there has rightly been separate and independent taxation of individuals since 1990, when it was recognised that there were major problems with taxing women as though their income were effectively part of their husbands' property. Those days may seem long ago now-it is 20 years since Lady Thatcher left Downing street, and 20 years since Britain joined the exchange rate mechanism-but the Government have adopted a déjà-vu approach to policy making which looks set to reopen that history.
	We have grown used to the principle of independent taxation over the past two decades, and many now take it for granted, but we ought to pause and reflect on why it is so important. The Government's proposed changes to child benefit imply a requirement for mothers to disclose their receipt of child benefit to their partners, and a requirement for partners or husbands to be taxed on the income of their spouses. That represents a potential breach of the principle of separate and individual taxation which, as the new clause says, was introduced in the Finance Act 1988, and which applied from 1990 onwards.
	The 1988 Act introduced a radical change in the system of taxing husbands and wives: independent taxation. Until then, husbands and wives were viewed as one person for tax purposes, and the Revenue, of course, saw only the husband. The spouse's income and gains were added together, and the couple were treated as if the total income were that of the husband. He was responsible for completing the annual tax return and for paying all tax due, including that on his wife's income and gains. However, with the introduction of independent taxation, spouses were treated as separate individuals for tax purposes and for the first time married women enjoyed privacy in, and responsibility for, their own tax affairs. In addition, some married couples were paying more tax because they were married than they would have if they had been cohabiting. That drew much criticism at the time.
	It is instructive to look back at the speeches advocating the virtues of independent taxation, especially by the then Chief Secretary to the Treasury, who has since been ennobled as Lord Lamont. In the 1988 Budget debate he called this reform
	"a radical proposal for independent taxation...It will give married women the independence and privacy in tax matters that they have been denied for so long...Under the new system, a married woman will be treated as a taxpayer in her own right with a full personal allowance to set against her income, and her own basic rate band. She will have responsibility for her own tax matters and will be able to enjoy complete privacy if she wishes...It is an important principle that there should be independence and privacy in taxation matters."-[ Official Report, 16 March 1988; Vol. 129, c. 1193-94.]
	Clearly the Prime Minister should heed the words of his former boss in these matters. I gather that Lord Lamont is still occasionally called upon to give advice to his former special adviser. Perhaps their diaries clashed on the day of the fateful decision on child benefit, but there is still time for the Prime Minister to make that call to Lord Lamont, and to see the error of his ways and rein in his doctrinaire Chancellor on this issue, especially as the Prime Minister promised before the general election to protect child benefit. Winding the clock back 20 years and reversing decades of progress in equality in taxation and in the responsibilities of individuals for their own income risks creating a set of major perversities in the tax system that could have significant ramifications. That is why the Opposition are opposed to the changes in child benefit.
	Let us consider the administrative shambles that would be created if the Government were to get their way.  The  Wall Street Journal has reported insiders in the civil service talking of "panic stations" at the Treasury with growing acceptance that the policy is virtually "unenforceable" and "likely to be ditched". If a mother is under no legal obligation to tell the father that she is in receipt of child benefit-unless we do see the end of independent taxation, of course-how can this tax on families work? Currently, the father's tax status is irrelevant to the mother's entitlement to child benefit. Can the Minister tell the House how this clawback arrangement will work, especially if parents are divorced or divorcing or separated or separating, or if the mother simply declines to report the tax status of the father of her children to Her Majesty's Revenue and Customs officials.
	Can the Minister also tell us whether the rumour that the Treasury is considering a new database to match mothers with their partners is true, and would that not make the Child Support Agency seem a bit like a pocket calculator by comparison? Will the Minister spell out the mechanisms the Treasury envisages in respect of this policy, and the enforcement mechanisms it is planning to put in place to take these sums off families earning approximately £45,000 or above? Will the Treasury be relying on a self-certification approach by the partner not in receipt of child benefit? Will the Minister take this opportunity to state for the record that the Government will continue with the important principle that mothers should be the primary recipient of child benefit payments?
	The poor design of this policy could easily undermine revenue plans too. Clawing back the cost of the benefit from higher rate taxpayers through the tax system would be "intrusive" and involve lots of form filling. That is the opinion of one of the Chancellor's own advisers on tax policy, John Whiting, who the Chancellor recently appointed as the tax director of the Office of Tax Simplification. Mr Whiting suggests that the policy would be an administrative burden that would merely "make a dent" in the estimated £2.5 billion of savings the Treasury claims the change would bring. We are not alone in questioning the logic of this ill-thought-through proposal, therefore. We know from the reporting on this policy that the Chancellor rode roughshod over his Cabinet colleagues when it was announced at the Conservative party conference. Clearly many in the Cabinet were oblivious to those plans when the Chancellor sprung them on them, but it is now clear that he also rode roughshod over those in the civil service. They were insufficiently included in the plans for this policy and had he consulted them properly, they would have pointed out the chaos that it would create.
	These are serious matters affecting millions of families across the UK, not only millionaires such as the Chancellor's family or the Prime Minister's family, but those on relatively modest incomes. They include police officers, college tutors, health service workers, senior teachers, pharmacists, paramedics, train drivers and air traffic controllers. Many are caught up in this category, the arbitrary design of which will create great unfairness with punitively high marginal rates of taxation.

Charlie Elphicke: The hon. Gentleman seems to want to convince the House that £45,000 a year is not very much money, but he should tell that to my constituents, whose average annual earnings are less than £20,000; that is what the average job pays in Dover and that is the norm in many parts of this country outside London. My constituents look askance at the fact that people on £45,000, a sum of earnings that they aspire to and dream of having, receive benefits. They tell me on the doorstep that they think that that is wrong, in principle, and that this measure is the right one to take.

Christopher Leslie: The hon. Gentleman is doing his job, supporting a policy that was not the one espoused in his party's manifesto. It certainly was not the policy that the Prime Minister advocated before the election when he promised to protect universal child benefit-he now says that it should be taken away from these "rich" individuals, but I do not agree. I do not believe that this class of middle-income families is necessarily finding life easy on this particular range of salaries. We have to speak up for that squeezed middle in society and that is absolutely what the Opposition intend to do. Where a policy could see a £1 pay rise for these families result in the loss of £2,000 in child benefit, depending on the number of children involved, it involves a punitively high rate of marginal taxation that surely even Members on the Government Benches would agree is flawed.
	At last week's Treasury Committee sitting, the director of the Institute for Fiscal Studies, Mike Brewer, described these cliff-edge issues as "economically perverse" and "distorting". He also said that it "seems unfair" that two families in different circumstances but perhaps separated by very small sums should be "treated so differently". His colleague, Carl Emmerson, added:
	"The income tax system, by being individually based, is basically neutral about whether individuals"
	should be taxed separately or together and that that is an "advantage" in the tax system.
	My right hon. Friend the Leader of the Opposition has rightly asked,
	"why should a family on £45,000 where one person stays at home lose their child benefit-£1,000, 2,000, £3,000 a year-but a family on £80,000 where both partners... are working should keep their child benefit?"-[ Official Report, 13 October 2010; Vol. 516, c. 322-23.]
	Even the Treasury has, begrudgingly, had to publish some statistics showing that this policy would create all sorts of anomalies and odd behaviour. It published a figure in the Budget suggesting that it expected to lose £270 million each year in revenue from people tax planning as they navigated this madness.
	A family with three children on £33,000 a year after tax is to lose £2,500 from 2013-that is the equivalent of a 6p in the pound hike in their income tax. Middle-class families are being hit, and it is particularly pernicious of the Conservatives and the Liberal Democrats to focus on children in this way as a means of raising money-they are clubbing families over the head with a higher tax burden while, of course, letting the banks off the hook. At the very least the Treasury should accept the new clause and agree to publish an independent review of the consequences for independent taxation if its plans for child benefit taxation of higher rate paying family members are to proceed.

Chris Evans: The conflicting press reports on this policy that we have seen over the last couple of months mean that the Government must explain their plans to withdraw child benefit. Like many commentators and Members of this House, I am deeply concerned by proposals that will see a lone parent or single-earner couple earning just above the higher rate threshold lose their child benefit while a dual-earner couple both earning just under the threshold would continue to receive it.
	The reform could also distort incentives for those with incomes around the higher tax threshold. As I understand it, those earning above the 40% tax bracket will no longer receive child benefit for their children-that bracket is currently about £44,000. The system is complicated by the fact that that rule applies to single wage earners. If both parents earned, say, £42,000-or £84,000 between them-their family would continue to receive child benefit.
	The Treasury has a duty tonight to explain how its plans to withdraw child benefit from families with a higher rate taxpayer could work in practice. Some tax experts have said that ending child benefit payments to couples with one higher rate taxpayer earning more than £43,875 a year is unenforceable. The method of recovery will require taxpayers to submit annual paperwork, new HMRC tax codes and a change in the law to cover parents who separate or live apart.
	Higher rate taxpayers will need to tick an honesty box on their tax return, stating whether they or their partner have received child benefit in the past year and it is said that they will be fined if the information provided is incorrect. According to press reports, taxpayers might face fines if they fail to disclose whether their household received child benefit. On 29 October 2010, the  Financial Times stated:
	"From 2013, higher-rate taxpayers in the self-assessment system will be required to tick a box declaring that their household claims child benefit. They will then pay a higher rate of tax corresponding to the level of benefit, which is worth £1,700 to a couple with two children.
	Those on the pay-as-you-earn tax system will be asked in a letter to disclose if their household claims the benefit-a declaration that will put them into a different tax code. The benefit would then be deducted in the next tax year, in an 'end-year adjustment' similar to that in the tax credit system."
	We have seen the problems that that has caused over the past couple of years. The article went on:
	"Legislation to implement the changes will include laws setting out what will happen to the benefit if parents split up, remarry or share custody."
	To me, it is not clear how a system based on an end-year adjustment would cope with in-year changes in circumstances such as the birth of a child, a partner moving out or a new partner moving in. It is also unclear what a household will constitute for these purposes. As I have said, parents who earn £42,000 each would keep the benefit-worth £1,752 a year for a couple with two children-whereas a family relying on one income of £44,000 would lose out. Someone with children on a £42,000 salary would be better off than someone on a £45,000 salary, as they could keep all their child benefit.
	At present, there are no definitions of "household" in either tax or child benefit law. Defining a couple is not easy, particularly if a couple split up. He might be a higher rate taxpayer while she is the carer for the children-or, with equality fresh in the mind, she could be a higher rate taxpayer while he is the carer for the children. When they part, she could claim child benefit as she has little other income, but if the rules treat them as still part of the same household-perhaps they have split up but are still living together-she could lose her child benefit, or even have to pay back whatever she has received.
	We already knew that the plans were unfair, but what has been increasingly clear is that they simply have not been thought through. We do not even know if the provisions on independent taxation will be repealed. If mothers are under no legal obligation to tell fathers that they are in receipt of child benefit, how can this tax on families work? The policy will simply create more work; there will have to be a lot of checking up. People will have to put a lot of effort in to get it and to make sure they are getting the right amount.
	We are now seeing significant confusion about what the policy means in practice. Quite simply, it is creating more questions than answers. In the June emergency Budget, it was announced that the income tax personal allowance will rise by £1,000 to £7,475 from April 2011. However, the 20% tax band is being squeezed so as not to benefit higher rate taxpayers: whereas the 40% tax band currently starts at £43,875, with no tax on the first £6,475 and 20% on the next £37,400, that will change from April next year. At that point, the 40% tax bracket will start at £42,375, with a personal tax allowance of £7,475 and a reduced £34,900 tax band of 20%. Does that mean that people could lose child benefit even if they earn less than £44,000 from April next year? If that is the case, an additional 800,000 wage earners will be brought into the higher rate tax band from next April, which makes a mockery of the Government's claims to be on the side of hard-working families. If tax allowances remain as planned, those earning more than £42,375 will be denied child benefit. The Government must answer these questions ahead of April 2011.

Chuka Umunna: Let me make three very quick points, parts of which will pick up on comments that have already been made.
	The first point is the issue of declaration. My hon. Friend the Member for Nottingham East (Chris Leslie) mentioned last week's Treasury Committee hearing, during which I asked the Chief Secretary to the Treasury how he intended to enforce the new child benefit measure. He said that the coalition Government will introduce legislation to require higher rate taxpayers to declare whether child benefit is coming into the household. Such a declaration is partly dependent on information being passed from one partner to the other. The Chief Secretary was very clear that the obligation to provide the information will be on the higher rate taxpayer. Why not also introduce a requirement in respect of the other half of the couple? As the Chief Secretary did not answer that, will the Minister now shed some light on it and reveal whether the Treasury has taken proper legal advice? The hon. Member for Dover (Charlie Elphicke), a former tax lawyer, is in the Chamber. I wonder whether he advised his colleagues.

Charlie Elphicke: I thank the hon. Gentleman for his kind words. As a lawyer, I might be very cautions, but as someone who has been in a relationship and who has found that couples tend to talk, I will ask the hon. Gentleman whether he is aware of any couples with children who do not share their financial information?

Chuka Umunna: I do not usually ask my friends and acquaintances whether they share financial information with their partners, but I hear the comments of the hon. Gentleman.
	My second point is, how will it be possible to prove the connection between the mother and the higher rate taxpayer, bearing in mind the problems that we have been having at Her Majesty's Revenue and Customs? Given that HMRC's resources have been cut over the past few years, how will it be able to keep tabs on the situation between couples on a monthly basis? As some 1.2 million families will be affected by the new measure, will HMRC be given any more funding to enable it to enforce the new change and to keep tabs on what is happening out there in the nation?
	Finally, John Whiting, joint interim head of the Office of Tax Simplification, has obviously commented on the problems of the new measure, but what is the point in setting up such an office when the people working within it and those heading it up have not been properly consulted or asked to advise on this measure? Surely, if the Government are not minded to accept this new clause, it would be a good idea to delay the introduction of this measure and ask the Office of Tax Simplification to do its job and advise on how it can be more efficiently introduced.

Geraint Davies: My hon. Friend makes a powerful case to look again at the detail. Does he agree that if the objective was to be fair and to put the burden on to the broadest shoulders, surely it would have been better to raise the marginal rate of tax from 40% to 41% , so that the people who have more pay more, and not just clobber people with children, who now have to pay more for their children. Those are couples, only one of whom might be working, where the 40% does not signal the best-off households.

Chuka Umunna: No doubt the Government will consider my hon. Friend's interesting suggestion and comment accordingly.
	One of the main problems with the new measure is that people fall off a cliff edge when they hit the higher rate. Have the Government considered introducing a taper mechanism to prevent that anomaly from occurring, because obviously that is where the unfairness shines through?

David Gauke: The new clause would link the future withdrawal of child benefit from higher rate taxpayers with the principle of independent taxation. The payment of child benefit is clearly a spending issue and is not directly linked to the Bill. I therefore shall not try your patience, Madam Deputy Speaker, but it is important to set out the background to the change.
	The spending review set out how the Government will tackle the deficit that they inherited from the previous Administration. Given the comments that have been made by the Leader of the Opposition-I congratulate him on becoming the recipient of another child benefit payment, and wish him and his family well-as well as by the hon. Member for Nottingham East (Chris Leslie) and several other Labour Members today, I take it that the Labour party remains opposed in principle to our reform of child benefit and believes that it should continue to be paid to all households.

Sheila Gilmore: Does the Minister agree that this is a case of reforming in haste and repenting at leisure? However tempting it might be to put in place something that sounds simple in principle, the complexity of the proposal should have been examined. The Government could have acted differently, such as by making child benefit part of taxable income. I do not necessarily suggest that that would be the best solution, but it would mean that several issues around independent taxation would not apply. If the Government wish to reduce child benefit to some households, there are other ways of doing it.

David Gauke: I take the hon. Lady's point, but I am not clear about whether her party's position is to say, "Something should be done, but we don't like the way it's being done," which, I think, is the position that she sets out, or to say, "We don't think anything should be done at all," in which case we must include the £2.5 billion that the measure will save the Exchequer-that is an estimate from the Office for Budget Responsibility-as part of our assessment of the Opposition's fiscal policies.

Chuka Umunna: The Minister cites savings of £2.5 billion, but will he estimate the likely cost of administering the new policy, which will have an impact on those savings? John Whiting has said that the extra burden associated with administering the change in the way it is envisaged will make a fairly big dent in the expected savings.

David Gauke: The hon. Gentleman asks a fair question, but I will not give him a precise number because that is something that we continue to consider. The implementation of any policy clearly involves a cost, but I assure him that this cost will be small when compared with £2.5 billion. I am keen to ensure that the policy does not place an undue burden on HMRC. He made a fair point about HMRC. It faces a budget reduction, even though the Government are protecting it by ensuring that it has more resources to tackle evasion and avoidance, but we are keen to ensure that the burden of administering the policy will not cause it undue difficulty.
	We have to take tough decisions and make tough choices, and this is one of the decisions that the Government have taken because we believe it is the right thing to do. We do not think it is fair to tax people on low incomes to pay for the child benefit of those earning much more. We cannot afford to continue providing financial support through child benefit to better-off households where there is a higher rate taxpayer. From January 2013, the Government will therefore withdraw child benefit from families that contain a higher rate taxpayer. Despite the noises from the Opposition, the British people understand that this is a tough, but fair, decision.

Geraint Davies: Can the Minister explain why the proposal to tax higher rate taxpayers in that way was made and announced before the comprehensive spending review? I put it to him that the reason for that was to warm up the audience and to make out that the comprehensive spending review would be fair and balanced, as opposed to the IFS's conclusion that it hit the poor two and a half times as much as it hit the rich. Was not the timing of the announcement entirely cynical?

David Gauke: The policy underlines the fact that the Government are looking to address our deficit in a way that is fair, and to ensure that all parts of society play their part and those with the broadest shoulders make the biggest contribution. That is what we are doing. It is remarkable that it is Opposition Members who appear to be trying to prevent that happening, though I am not sure whether they object to the way in which it is being done or whether they intend to fight in the last ditch to defend the principle of universality as it applies to child benefit.
	We wanted to avoid creating a complex new means test for household income. To do so would fundamentally change the nature of child benefit and come at a significant cost to the taxpayer. This policy has therefore been designed to avoid affecting the vast majority of the population-some 80%-who are basic rate taxpayers. It also avoids additional systems being developed, as the measure can be delivered within existing pay-as-you-earn and self-assessment systems.
	Let me deal with the issue behind the new clause-the principle of independent taxation, which was introduced in the Finance Act 1988. It is a great pleasure to hear Opposition Members applauding the 1988 Budget. If I remember rightly, proceedings in this place at the time were interrupted as the Chancellor of the Exchequer was shouted down by some Opposition Members. Section 32 abolished the provision that a wife's income was income of her husband for income tax purposes. That remains the case, and none of the proposed changes to child benefit alters it.
	Child benefit is provided for a child within a family and it is therefore necessary to consider the family as a group. The policy merely withdraws child benefit from a family to whom it is difficult to justify paying it. Furthermore, the withdrawal of child benefit from families containing a higher rate taxpayer will not affect the personal allowance or rate band applicable to an individual. The changes apply a simple test to ensure that child benefit is not provided to those who need it the least.
	Of course, the House will have the full opportunity to debate the changes to child benefit when they are legislated, ahead of implementation in January 2013. That would be a better time to discuss the various specific issues that have been raised in the course of the debate. Although I understand that Opposition Members may wish to draw a link between child benefit and independent taxation in order to have this debate today, it is clear that the two systems remain separate and independent.

Christopher Leslie: I am trying to follow the Minister's logic. Does HMRC envisage child benefit continuing to be paid to all mothers, but that higher rate taxpayers will have a sum equivalent to child benefit deducted from their income, on top of taxes?

David Gauke: The hon. Gentleman, who has been somewhat ingenious in tabling the new clause, again seeks to draw me into a wider debate about the implementation of child benefit. He sets out one way in which it could work; in other circumstances, claimants might seek to stop receiving child benefit. However, I must stress that, although he has been somewhat ingenious in raising the issue in the context of the Finance (No.2) Bill, the new clause has nothing to do with independent taxation, so I ask him to withdraw it.

Christopher Leslie: I am astonished by the Minister's blinkered approach in sticking to the robotic text, "This has absolutely nothing to do with independent taxation," when it patently does. If a higher rate taxpayer is being asked to pay for income that their partner or spouse receives, that clearly breaches the principle of independent taxation. The hon. Gentleman would not be drawn into the mechanism by which the scheme would be set up, but, given the great fanfare with which the policy was announced at the Conservative party conference, I would have thought that by now the panic stations at the Treasury might surely have subsided, and that he would be able to share with the House exactly how the measure would work.
	I am glad that the hon. Gentleman congratulated my right hon. Friend the Leader of the Opposition on the arrival of his new baby. May I, too, add my congratulations to my right hon. Friend? It reminds me that I should have possibly declared an interest in child benefit at the beginning of the debate, but there may be a sufficient quantum of participants to make that unnecessary.
	My hon. Friend the Member for Islwyn (Chris Evans) was right to describe the chaos involved in the measure. He asked, will tax circumstances be adjusted for in-year changes in circumstance? The answer is no, unless of course a child happens to be born at the very beginning of the tax year, but perhaps that is part of the Government's plan: children will be able to be born only at certain parts of the year, or by quarter, so that HMRC is able to apply the tax rules with administrative ease.
	My hon. Friend the Member for Streatham (Mr Umunna) pointed out the Government's sketchy plans in relying on a declaration by the higher rate taxpayer in order to disclose about child benefit something of which, of course, they may or may not be aware. The fact that the Office for Tax Simplification-again, much vaunted when it was established-does not seem to have been consulted or involved leads me to suspect that the OTS may well have been set up for the benefit of high net-worth individuals, rather than to simplify the tax arrangements of ordinary taxpayers.
	The Minister has failed to set out how the child benefit taxation arrangement will work. There are hundreds of thousands of families throughout the country hanging on his words and trying to find out how on earth the scheme will be arranged, particularly given the perversity that will be introduced through the high marginal rate of taxation. Do not let us forget that that extra pound could result in an individual losing £2,000 in child benefit.

Geraint Davies: In my constituency, my hon. Friend's constituency and throughout the country, there are women who do not earn any money but live in a household with a partner, receive child benefit and spend the money on their children. In the light of their uncertainty about the future, given what we all know about the divorce rates, those women are critically concerned that the hand of government will suddenly come in and snatch that money from them or their children because of what the man earns. The Bill is clearly an infringement of independent taxation and an attack on children and mothers.

Christopher Leslie: My hon. Friend highlights the fact that I cannot see this being the end of the matter. The Minister suggests that the measure is part of the Government's carefully calculated spending commitments, but I do not think that they will continue with the plan. There are so many anomalies and problems in its design and operation that they clearly did not think it through properly. They might have looked at the ready reckoner, saying "Oh yes" as they licked their lips at the £2.5 billion that they could take from families, and went straight to the first day of the Conservative party conference to announce their proposal, but it is unravelling by the moment.
	The Institute for Fiscal Studies and others are starting to highlight the economic perversities and distorting effect of this measure. Even the sole issue of independent taxation is sufficient to hole below the waterline the Government's plans to tax child benefit. I therefore hope that we can divide the House on the new clause.

Question put, That the clause be read a Second time.
	 The House divided: Ayes 218, Noes 302.

Question accordingly negatived.

New Clause 3
	 — 
	Bank taxation

'The Treasury shall publish a report before the 2011 Budget examining the level of taxation on the banking and financial services industry.'.- (Chris Leslie.)
	 Brought up, and read the First time.

Christopher Leslie: I beg to move, That the clause be read a Second time.
	This is a short new clause, which stands in my name and those of my hon. Friend the Member for Bristol East (Kerry McCarthy) and my right hon. Friend the Member for Delyn (Mr Hanson). It might be naive of me to expect that the promises made by the Prime Minister in opposition still hold good today, but this debate is necessary because of his rhetoric then, when he said that
	"there should be a day of reckoning"
	for the banks-
	"A day when we would not flinch from spelling out the rightful consequences of irresponsible behaviour...this is a question of fairness...on behalf of working families".
	He continued:
	"we show clearly that...there is not one rule for the rich and a different rule for everybody else."
	Those are the words of the Prime Minister-before the last general election, of course. Time has moved on, the ministerial cars have become very comfortable, but the Treasury has barely lifted a finger to fulfil the promises to reform the tax regime in which the major banks operate. Perhaps that is a convenient state of affairs for the Conservatives and Liberal Democrats as they desperately try to shift attention from the banks' culpability for the state we are in, but there is still an urgent need to take stock of their contribution to repairing the public purse and to see decisions taken that might help to alleviate the looming crisis of public service redundancies and cutbacks.
	The Chancellor's spending review, to which the Opposition obviously take great exception, is based on the pretext that "There is no alternative". In other words, anyone who even dares to murmur that there is any other course of action is somehow using flawed, unreasonable or unrealistic logic. That not only insults the intelligence of the public at large, but is profoundly short-sighted, as there are a great many alternative strategies that the Government should be considering. However, they insist that there is no plan B.
	The new clause would shed further light on the facts behind the claim that there are no alternative revenues that could alleviate the burden of service and welfare cuts, which will fall heaviest, as we know, on middle-income families and some of the poorest adults and children in this country. We surely owe it to those people-our constituents-to try harder to find ways to close the tax gap, to create growth and new jobs, to generate new income and to bear down on the tax avoidance that costs billions of pounds each year.
	Let us remember why we have the budget deficit. Contrary to the spinology that we will no doubt get from Government Members, who are obviously desperate to politicise the deficit in the hope of providing cover for their ideological scaling-back of public investment, our national debt was caused primarily not by a spending spree, as they claim, but by a dramatic collapse in revenues to the Treasury from income tax, VAT and corporation tax as a result of the global credit crunch and recession. The £132 billion rise in the deficit in the last financial year was, yes, partly the result of £53 billion in extra social protection expenditure, which was necessary, for example, for unemployment benefits. More importantly, however, there was the £79 billion decrease in revenues. It is that collapse in revenues, which was compounded by the need to spend billions shoring up the banking system and preventing its collapse, that the Conservative party consistently and mysteriously want to overlook.
	Let us remind ourselves of the banking bail-out, because significant sums were spent, and had to be spent, on it. Those sums included £76 billion to purchase shares in the Royal Bank of Scotland and Lloyds Banking Group, £200 billion to indemnify the Bank of England against losses occurred in providing liquidity support, £250 billion to guarantee banks' wholesale borrowing and strengthen liquidity in the banking system, £40 billion to provide loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme, and £280 billion agreed in principle to provide insurance for a selection of banking assets. All in all, it was the credit crunch, as we know, that led to the banking crisis and the recession. It is those things, not the public service inflation on which the Conservative party is completely fixated, that were the underpinning factors fuelling the deficit.
	The banks owe taxpayers a massive debt of gratitude-that much is clear. They would have gone bust were it not for the deficit facility that we are now grappling with. My constituents are therefore repeatedly asking one simple question: will the banks be made to pay their fair share, getting us out of the deficit that they helped to create because of their business mistakes? Before the election, the Prime Minister gave every impression that that would be so, but so far very little action has been taken.
	I do not want to penalise the banking sector to the point of annihilation; nobody wants our economy's financial services sector to fail further. Indeed, it should be resurrected in a more sustainable, diverse and healthy form for the future. However, when the Government are raising VAT on the rest of us, cutting police budgets, for example, by 20%, severely squeezing students and those on housing benefit, and forcing the closure of fire services, libraries and community services-the list goes on and on-we should surely examine more closely the level of taxation that the banks are paying. That is the point of new clause 3.
	The Government say that the banking levy is the answer-that is what we will hear from Ministers tonight-but let us explore that point. Although the banking levy is in principle welcome, it is now patently obvious that it has been set at a woefully inadequate level. When the Chancellor unveiled it in the June Budget, it was greeted with relief in the City, which had been bracing itself for a hit of about £5 billion a year. The eventual 0.07% tax that the big UK banks will pay on their assets is less than half the rate envisaged in the United States when it was planning to implement a parallel scheme.
	Most City experts know that, in reality, the banks are getting off quite lightly. Citigroup estimated that Lloyds could pay a levy of only about £268 million in 2012, compared with £292 million for RBS and £368 million for Barclays, and that for HSBC the levy for the same year could be £311 million. Deutsche Bank analysts said that the Budget was "a good outcome" for the banks, and a City insider was quoted in the  Daily Mail as saying:
	"Privately, some banks will have a feeling of glee at the way this has worked out. But none would be stupid enough to say anything openly."
	HSBC's banking analyst said:
	"We'd expect most domestically-orientated banks, for example Lloyds, to be better off after four years than they were pre-budget".

Stewart Hosie: This is interesting. I have seen many of these quotes before, and I am certainly minded to support the new clause, if the hon. Gentleman pushes it to a vote. An examination of the level of tax on banking is sensible, but I would like to know what the Labour party proposes for the level of taxation, given that every billion out of the banks is about £10 million to £15 million less to lend in the real economy. I am curious, therefore, to find out how punitive the Labour party would be.

Christopher Leslie: I accept the hon. Gentleman's point. We have to be prudent in how we address these questions, and I hope to come to some of the matters he raises as we explore corporation tax and so on. If he bears with me, I will-hopefully-elaborate.
	UBS analysts said that they expected Lloyds and HSBC to benefit by 2012 because of the cut in corporation tax bills, which in their case was larger than the hit they expected to be sustained through the banking levy. It seems, therefore, that the banking levy is playing quite a small part, perhaps a walk-on character-

Charlie Elphicke: rose-

Christopher Leslie: A walk-on character with very few lines-unlike the hon. Gentleman, to whom I give way.

Charlie Elphicke: I would like to put a couple of points to the hon. Gentleman. First, taking the case of Lloyds and RBS, are there not likely to be substantial carry-forward losses in those banks, which will not be paying corporation tax for many years to come, let alone by 2012? Secondly, were they then to face a higher rate of tax, which I believe he is proposing, would the cost on those banks not result in the devaluation of their shares, which are now owned by the public? Surely, it would go round in a circle.

Christopher Leslie: I will come to deferred tax in a moment, because the corporation tax questions require much greater scrutiny. That is one reason we tabled the new clause. I hope that the hon. Gentleman will join me in the Lobby, should we divide on this issue-unless the Treasury concede it-and that he agrees that we should have a review of the level of tax the banks are paying. If they are paying too much, which I doubt, I will be happy to look at the evidence and the facts. However, there is opacity about these questions, and given the hit falling on the shoulders of families and children in this country, it is incumbent on us to ask whether the banks will be paying their fair share. That is all we are asking this evening.
	We think that the Government's banking levy has been a limp effort so far. Given some of the corporation tax changes, there is a bit of a cashback arrangement for some of the banks. I would like to touch on three areas of corporation tax that I think require more serious and rigorous review. The first is that cashback boost for the banks resulting from the reduction in corporation tax rates announced in the Budget. The Exchequer Secretary confirmed in a written answer that over the lifetime of the spending review the Treasury expects that the cut in corporation tax main rate from 28% to 27%, and eventually down to 24%, will return £1 billion to the banks-specifically to the banks:
	"£0.1 billion in 2011-12, £0.2 billion in 2012-13, £0.3 billion in 2013-14 and £0.4 billion in 2014-15."-[ Official Report, 1 July 2010; Vol. 512, c. 610W.]

David Gauke: It is dangerous to intervene given that I do not have the answer to which the hon. Gentleman has referred in front of me, but my recollection is that the answer to that parliamentary question was in the context of financial services companies as a whole, including insurance firms, not specifically banks.

Christopher Leslie: It might well be that in that written answer the Exchequer Secretary's definition of "financial services" extends slightly beyond the banks. I am happy to concede that point. Of course, we framed the new clause in order to explore the tax burden not just on the banks but on financial services more widely. However, even the hon. Gentleman would have to concede that the banks will probably be the principal beneficiaries of the corporation tax cut that he is choosing to give them at a time when he is taking money from young, pregnant mothers-the health in pregnancy grant, to name one example of an incongruous decision that might be questioned by our constituents.

Justine Greening: I can see that the hon. Gentleman is slightly confused about the written answer, so I want to clarify it for him, as I have a copy of it. The figures he gave relate to "financial sector" companies, so does he accept that he got his figures wrong when he said he was talking specifically about the banks?

Christopher Leslie: The hon. Lady has several thousand civil servants-for the time being, at least, before they are made redundant-in the Treasury to help her with the costings for such questions. I can only go with the facts published in  Hansard. Perhaps she could save me the trouble of tabling a further written question to find out what the bank cashback arrangement will be on corporation tax. I will give way to her if she has to hand the precise figures on what the UK banks will be gaining from the corporation tax cut. Can she tell us what those figures are? If not, I will table a written question. If she can swiftly answer that, it will be for the benefit of the House. I am pretty sure that it will be a net gain for the banks.

David Gauke: rose-

Christopher Leslie: Will the hon. Gentleman give me the figures?

David Gauke: Let me deal with this directly. The Treasury and Her Majesty's Revenue and Customs figures that we have look at hits by sector-in this case, the financial services sector, which includes not only banking but insurance and financial auxiliary services. The hon. Gentleman quoted his figures and suggested that they represent a net gain. In fact, by the time we get to 2014-15, the bank levy will be £2.4 billion. At the same time, the corporation tax cuts in 2014-15 will benefit the financial services sector by £0.4 billion. However we divide £0.4 billion, it is hard to see how it will ever be higher than £2.4 billion.

Christopher Leslie: Were those the only two relevant factors, that might be the case, but of course they are not. There are other tax changes through which the banks will more than benefit from the arrangements. If the Exchequer Secretary had had the patience to wait, I would have elaborated on that. I will come to that quicker.
	It is important that the Exchequer Secretary listens to those experts who have talked about the benefit to the banks from the corporation tax change. Lloyds Banking Group plc could gain more from a cut in corporation tax than it loses under the new banking levy, according to analysts at Redburn Partners legal practice. Lloyds, 41% of which is owned by the British Government, might see a 3% rise in its earnings per share in 2012 as corporation tax begins to fall to 24% from 28% over those four years, according to Redburn analyst, Jon Kirk. There will therefore be a net positive for Lloyds. That is one example of a net gain for the banks.
	Secondly, the banks have already found a way of minimising their corporation tax liabilities. A report published only last week by the TUC on the corporation tax gap showed a gap between the headline rate of corporation tax paid and the actual or effective rate of corporation tax paid. The TUC's analysis of data on UK corporate returns showed that the larger a company is, the better it tends to be at reducing its effective rate of corporation tax, which fell from 28% in 2000, when the headline rate was 30%, to about 23% in 2009, when the headline rate was 28%. On that basis, the TUC's economists predict that by 2014, the largest companies will be paying corporation tax at a rate of no more than 17% on average, while small companies will still be paying corporation tax at 20% or more.

Stephen Hammond: The hon. Gentleman will know that there are all sorts of reasons why the headline rate of corporation tax may not reflect the rate of corporation tax that is actually paid, which are to do with credits for R and D, and all sorts of things. He keeps quoting what the TUC report says about larger companies, but what does it say about the banking sector?

Christopher Leslie: The TUC says that the effective rate of corporation tax for the banks will fall from 25% in 2000 to below 20% this year, which means that, in reality, they are already paying a rate that is below the headline rate that small firms pay. Those findings are certainly eye-catching. All I am saying in new clause 3 is that they merit further review and consideration, which would be a reasonable step to take. Indeed, those findings suggest that we could even be heading towards a regressive corporation tax system in the UK. Small businesses should be paying less in corporation tax than the banks, but the evidence suggests that that might not be the case.
	The third wheeze that the banks might benefit from, in their navigation of the corporation tax system, is known as deferred tax, which can be defined as the tax liability that might be payable at some point in the future because of transactions that have already taken place, albeit where there is no certainty about when it will have to be paid. Deferring the payment of tax is not something that ordinary taxpayers can indulge in with great ease, yet it appears that the banks are playing that game on a gargantuan scale, according to the findings of Richard Murphy, the director of Tax Research LLP. He suggests in his recent report that the banks' deferral of tax reserves are absolutely phenomenal. He calculates that a sum totalling nearly £19 billion, which is nearly half what this country spends on capital projects annually, might not be paid by the banks in corporation tax as a result. He describes that as
	"an extraordinary double subsidy going on for these banks."
	Not only were the banks underpinned by the taxpayer in 2008-they are still underpinned in the form of the guarantees offered by the Treasury-but they may receive another fillip, he argues, from that deferred corporation tax gain.

Stewart Hosie: Unless my memory is playing tricks on me, at least one of the nationalised banks used those unused or deferred tax assets to pay for the asset protection scheme, which was set up-rightly-by the Labour Government in the previous Parliament. Without those unused tax assets or that deferred tax, the asset protection scheme would not have been possible, thereby imposing an even bigger burden on the banks, so I am not quite sure where he is going with this.

Christopher Leslie: I am not making any particular proposals at this point; I am simply saying in new clause 3 that we should review the level of tax that banks are paying. There may be perfectly good and justified reasons for it, but we are talking about enormous sums of money. If, as some allege, the banks are playing a canny game, with sums of money that might have prevented many of the swingeing cuts that we are seeing to public services, it is incumbent on us, on behalf of our constituents, to ask those questions. If we are indeed "all in it together", as we are constantly told, we should ensure that the banks pay their fair share and do not leave the rest of us picking up all the bills.
	Banker bonus season is around the corner. It seems rather than showing restraint, the bankers may be showing a return to form. Last week, Deutsche bank reported its third quarter results, saying that it had set aside £4 billion in the bonus pool for its corporate and investment bank over the first nine months, amounting to around €285,000 per employee. According to the financial services recruitment firm Astbury Marsden, banks and hedge funds are stepping up their bonus buy-out offers, as they try to prise key staff from their competitors. Goldman Sachs, a Wall street bank with a large British operation, has managed to set aside around £236,000 per employee in compensation for the first nine months of the year, which is obviously less than the $527,000 that we saw this time last year, although it still demonstrates that potential pay-outs are being lined up in the City for February, when they are traditionally handed out.
	Richard Lambert, the outgoing director general of the CBI, has called for a global ceasefire between banks, to stop bonuses spiralling upwards, thereby further undermining the public's trust. In his speech to the CBI's annual conference this month, he said:
	"Carrying on with business as normal would seem arrogant and out of touch,"
	pointing out that many workers were facing job cuts and pay freezes. Those comments came as a survey found that seven out of 10 bankers expected to take home more pay this year, with half expecting a bigger bonus than last year, according to the website eFinancialCareers. City head-hunters Morgan McKinley found that 48% of financiers are expecting a higher bonus. The Centre for Economics and Business Research has predicted that £7 billion is likely to be paid out this year.
	The former Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling), wisely instituted a bank payroll tax on banker bonuses while Labour was still in charge, netting some £2.5 billion for the Exchequer. Yet despite the coalition agreement promising to
	"bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector,"
	nothing significant has yet materialised from the Government. In fact, worse, the Government now appear to be rowing back from their commitments to tackle excessive banker bonuses. Last Monday, the Treasury Minister in the House of Lords, Lord Sassoon, told peers that
	"the Government have taken action to tackle unacceptable bonuses in the banking sector,"
	although it was not quite clear what that action was. He continued:
	"The Financial Services Authority is updating the remuneration code, which will ensure that bonuses are deferred and aligned with the underlying risks, and significant portions of any bonus will be paid in shares or other securities,"
	which was not something that originated with the Conservatives. He went on:
	"Employees in this industry will no longer receive all their bonuses in cash while leaving their shareholders, and potentially the taxpayer, exposed to the long-term consequences of the risks they take."
	When asked by my noble Friend Lord Myners whether that meant that future bonuses would be "deemed to be acceptable", Lord Sassoon merely reiterated his earlier remark, saying:
	"My Lords, what I said was that we have indeed taken action".-[ Official Report, House of Lords, 1 November 2010; Vol. 721, c. 1417-18.]

Chuka Umunna: Has my hon. Friend noticed that in the same package of measures in the emergency Budget-this was also touched on in the comprehensive spending review Green Book-there is also provision for a remuneration disclosure scheme? In the emergency Red Book and the CSR Green Book, we were told that the Government would come forward with details on how they would implement the scheme, which would require greater transparency in the financial services sector, so that the country could see what those in the sector were earning and whether there were irresponsible remuneration packages in place. It seems that the scheme will not now be implemented in time for the bonus round that my hon. Friend has just mentioned.

Christopher Leslie: Absolutely, and it is no coincidence that it is on the first page of promises in the coalition agreement-actually, the reason is alphabetical; the first page starts with b, for "banking"-that many of those promises, including the promise to tackle banker bonuses, were made. The Government have tried to suggest that they are being tough and that they will take action, but that action has not been forthcoming. I want to hear from the Minister whether the Government are now content with the current framework, in which higher banker bonuses look set to continue to be paid. If not, will he say when the Government will bring forward proposals to act? It is a specific and simple question. The House wants to hear what the Minister has to say.
	The coalition agreement also promised to use net lending targets for the nationalised banks as a means of getting credit flowing to businesses, as the hon. Member for Dundee East (Stewart Hosie) has suggested. Yet last week, the Prime Minister again shifted his stance. In a meeting with business leaders in Hertfordshire, he stepped back from that pledge, and indicated that lending targets for banks would not be reintroduced. He said:
	"You can go for lending agreements with the banks. The trouble is, what I find with lending agreements is that they will promise to do a certain amount of lending to one sector, but they'll shrink it somewhere else."
	His comments were followed by similar remarks from the Minister with responsibility for small businesses at the Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk). Last Monday, the Government published their response to the Green Paper consultation on financing the economic recovery, and it was conspicuous by its absence that no mention was made of net lending targets. Have the Government softened their position on the pursuit of net lending targets to business?
	During the summer, the Chancellor said that he would be exploring the costs and benefits of a financial activities tax on profits and remuneration. He repeatedly said that he would consider such a levy on the total profits and remuneration of financial institutions rather than on individual transactions, and the European Commission backed the financial activities tax, but when it was brought forward for discussion at the EU Council summit on 28 September, Ministers seemed to be rowing back from even that pledge. Will the Minister tell the House where the Government stand on the proposal for a financial activities tax? The rumour was that the Government did not want that idea going forward to the G20 summit in Seoul this coming weekend. If so, why?
	Many of our constituents will be aware of the proposal from 50 or so charities and other voluntary bodies for a financial transactions tax, which is slightly different from a financial activities tax, and would apply to a wide range of individual capital movements, including equities, bonds and derivatives. That Tobin tax or Robin Hood tax deserves a thorough review, although clearly there are arguments for and against with regard to the details and the relative impact on London as a centre for financial transactions. Nevertheless, the Government have singularly failed to respond to that campaign so far. Any review of banking taxation would need to analyse the case for a financial transactions tax far more rigorously as it is a serious proposition meriting a serious response. All in all, the banks' tax position needs a far more serious review than the piecemeal commitments offered by Ministers so far.

Justine Greening: Will the hon. Gentleman clarify whether the Labour party supports a financial transactions tax?

Christopher Leslie: We want to review it. Does the hon. Lady? Is she interested in looking at the proposition, or is she ruling it out completely?

Justine Greening: I note that the hon. Gentleman failed to answer my question. I will respond to him broadly when I have heard the rest of the debate, and when I have a chance to respond to his new clause.

Christopher Leslie: I thought it was a simple question. I thought the whole point of a debate was to exchange views. I am happy to review the financial transactions tax. It is an important proposition, and it deserves serious consideration. The Minister does not seem to know whether she is allowed to review it. Perhaps some inspiration has come down from on high. There is scurrying around, and I see that the Chancellor has been paging her officials. I am sure that inspiration will come to her shortly.
	Will the Minister say whether there should be a change in tax policy to rectify some of the loopholes, such as those in corporation tax? Should there be a further review of, for example, the bank payroll tax? Should banks have their right to carry tax losses forward limited so that they expire after a specific time, or would that be detrimental? Clearly, the Government's feeble attempt to recoup something from the banks through the banking levy alone is barely denting their balance sheets and is dwarfed by, for example, the deferred tax assets that the banks are wielding according to the report.
	Ministers should concede that the whole matter needs clearing up urgently if they are to have any hope of preventing widespread public cynicism, discontent and anger. In short, as things stand, all we see from the Government is a puny banking levy, banks still using corporation tax loopholes at taxpayers' expense, promises on bankers' bonuses unfulfilled, promises on banks' net lending targets more distant than ever, and inaction on reforms to the banking taxation system. The taxpayers of this country deserve better.

Chris Evans: Since coming to the House, I have seen a lot of history being rewritten. We are told whenever we stand in the Chamber that we must apologise for the economy, but to coin a phrase from  The Sun on the day after the general election in 1992, "It was the banks wot did it." There is widespread public anger with the banks, and people believe that they are getting away scot-free.
	At my surgeries, in my local Labour party and out in the streets, people ask me why our nurses and teachers are bearing the brunt of the deficit-what about those casino bankers? If it were not for their reckless practices, why did the then shadow Chancellor just before the general election commit to follow Labour's spending plans for two years if we were so bad at running the economy? The simple fact is that the banks have not paid the price for the deficit that they helped to run up.
	The new clause is not about destroying the banking system; it is about strengthening it, which means changing it and making it mixed. I know that this is outwith the amendment, but I would like a mutual element in the banking system, and that could start with Northern Rock. The simple fact is that the banks received £1 trillion. Can anyone imagine what £1 trillion looks like? Can anyone imagine what public works we could do with £1 trillion? Projects in my constituency are crying out for money. The Newbridge Memo, the memorial hall, needs restoration. So much could be done with a tiny part of that £1 trillion. But the bankers remain blasé and people think they are plain arrogant.
	If no one believes me, let them look at Lloyds TSB, which this week appointed a chief executive. I will not embarrass myself by trying to pronounce his Spanish name, but we are told he will receive a package of £8 million. Who is worth £8 million, and what message does that send to people who are struggling to get by? It sends the message that the Government do not care how much damage bankers have done-they can carry on as they have been. When we read about such figures, what are we saying to people on the ground? They are the ones who must pay.
	My hon. Friend the Member for Nottingham East (Chris Leslie) talked about bankers' bonuses, and I wholeheartedly agree that something must be done to rein them in. However, I have been a High street banker. I worked for Lloyds TSB, and I know for a fact that someone working as a personal account manager or personal banker is desperate for their bonus at the end of the month, because it makes up their wage. If we rein in the big City bonuses, we must think about the people on the ground. Let us not rein in their bonuses. They still have to pay their bills, and we must think about that. I ask the Government to consider the new clause because the banks really must pay their fair share.

Chuka Umunna: I endorse the comments made by my hon. Friend the Member for Islwyn (Chris Evans). I, too, hear similar sentiments expressed on the streets throughout my constituency.
	Opposition Members are not under any illusion that banker-bashing, as it has been called, or reining in bonuses alone will sort out the problems with the financial services sector. It is important to reform the way it operates generally, which is why I welcome the banking commission that the Government have set up. Its terms of reference are sensible and, as a member of the Treasury Select Committee, I look forward to providing some input to that.
	There are legitimate questions to be answered on whether the financial services sector is doing what the Chancellor said in the emergency Budget he would require it to do. He said:
	"I believe that it is fair and right that in future banks should make a more appropriate contribution, reflecting the many risks that they generate."-[ Official Report, 22 June 2010; Vol. 512, c. 175.]
	That is why I welcome the new clause. We should reflect on the huge contribution that the British public have had to make to the financial services sector since September 2007 and before.
	Of course, some banks were taken into public ownership, including Northern Rock, Bradford & Bingley, Royal Bank of Scotland and Lloyds HBOS, but we are not talking only about the measures implemented by the previous Government on the eve of the financial crisis to nationalise or take a public stake in those banks. A package of measures was also put in place for the many other banks that were not taken into public ownership, as my hon. Friend the Member for Nottingham East (Chris Leslie) has mentioned. In addition to the special liquidity scheme, there were the inter-bank lending guarantees and the banning in 2009 of short selling practices.
	All those factors contributed to helping the entire sector and, as a result, those banks are still operating today. Their balance sheets are looking far healthier and, during the summer, the five biggest players in the sector reported half-year pre-tax profits of more than £15 billion. So the good times are back in the City. My hon. Friend also mentioned the predictions of the bonuses that are likely to be paid in the current round. Over the weekend, for example, we read that at RBS some £2.1 billion has been accrued to pay staff salaries, benefits and bonuses, compared with £2.2 billion a year ago, at a time when revenue has dropped from £9 billion to £6.3 billion.
	I am puzzled by the package of measures in the CSR Green Book that tell us that the banking sector will be required to make a greater contribution. If we look at the banking levy, for example, we see the sum of £2.5 billion being bandied about as the amount that we can expect the banks to pay. However, I have been told in an answer to a written parliamentary question that the amount coming in from them will be £1.15 billion in 2011-12, that it will be £2.32 billion in 2012-13, and that it will reach £2.5 billion only in 2013-14 before falling back to £2.4 billion in 2014-15. My right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson) has pointed out that, by the end of that four-year period, the banks will be paying less than all the parents who are giving up their entitlement to child benefit, thanks to the measures announced by the Chancellor at the Conservative party conference on 4 October.
	I would also be interested to hear the Minister's comments on the fact that the banking levy is to be implemented in such a way that the banks will not have to pay it on the first £20 million of taxable liabilities. It is extraordinary that they appear to be receiving a tax break before the tax has even been introduced. Will she also comment on the views expressed by the International Monetary Fund on the rate at which the levy is to be imposed? The IMF is clearly of the view that the banking industry in general has been under-taxed, and it has called for the levy to be tripled so that it could bring in at least £6 billion a year. Just think what we could do with the extra moneys! We could reinstitute the future jobs fund, for example.
	The IMF's proposal is quite moderate when we consider what Oxfam is proposing, however. It argues that the levy should be imposed in such a way that it raises £20 billion. That is not even being proposed by Opposition Members at present. I ask the Minister to reflect on whether the measures that appear in the CSR Green Book under the heading "Everyone making a fair contribution" will do as they say they will do-namely, require the banking sector to make a contribution that is proportionate to all the problems it has caused for our constituents.
	The Prime Minister will be attending the G20 summit in Seoul this week. Looking back at the G20 summit in April 2009, I believe that we as a country can be proud that we hosted that summit, and that it resulted in a package of measures that had a major effect on the way in which the financial services sector operates. Lord Turner introduced proposals on remuneration in the industry, which were tabled to all the G20 countries. Many of those proposals were adopted. The tax havens that had been operating around the world were clamped down on, and I believe that the banking levy was first proposed in an international context at that summit. Will the Minister tell us what leadership we can expect from the Prime Minister at Seoul this week? What measures will he argue for, and what can we expect to come out of that G20 summit that will make the financial services sector cease the reckless behaviour that led to the global financial crisis and, above all, contribute to paying down the deficit, on which the Chancellor is so fixated?

Nicholas Dakin: My right hon. and hon. Friends have asked a number of questions that deserve detailed answers. The new clause calls for a review of the total level of taxation on the banks and the financial services sector before the setting of the 2011 Budget, and at its heart is the simple question of accountability, transparency and openness. It must be made clear to the people of this country that the banks are paying their fair share. It was, after all, the banks that got us into this situation. At a time when this Government are taking so much away from honest, working people-particularly those with families-it is crucial to demonstrate that we are all in this together and that the banks are paying their fair share.
	People are facing an increase in VAT, students are facing a trebling of tuition fees, the education maintenance allowance is being taken away, and child benefit is being capped, frozen and even taken away from many people. With all those massive cuts in public spending, it is crucial that we should know for certain that the banks are paying their fair share. That is all that the new clause endeavours to achieve. We want to make it clear that the banks are not continuing with their present bonus culture, and that they are making a fair contribution to the country. After all, it was the taxpayers who delved into their pockets to keep the banks afloat. This is a simple proposal, simply put, about openness, transparency and accountability, and I can see no good reason not to support it. It would give the people of this country great confidence in the Government if they were to accept this proposal tonight.

Justine Greening: The new clause relates to the taxation of the banking and financial services industry, and proposes that the Treasury publish a report before the 2011 Budget examining the level of taxation on those sectors. Before I discuss the new clause directly, I think it would be helpful to set out some of the background and context relating to the Government's approach to taxation of the banking sector. The Chancellor set out clearly in the recent spending review the Government's objective in taxing the banking industry. We inherited the largest peacetime deficit in UK history, and, during these difficult times it is only right that steps are taken to ensure that the banks pay a full and fair contribution.
	I listened with interest to Opposition Members, who appear to have a very blinkered perspective of regulatory issues. They skimmed over their own Government's part in the regulatory failures that led to the banking sector crisis. It is worth going back to some comments made by the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). I know he is now making speeches in the House again, but it might have been helpful if he had participated in this debate, given his own involvement in these matters. When opening Lehman Brothers' new European headquarters in 2004, he said:
	"I would like to pay tribute to the contribution you and your company make to the prosperity of Britain".
	He also said that Lehman Brothers
	"has always been an innovator, financing new ideas and inventions before many others even began to realise their potential."
	The last Government clearly had a huge role to play in that the regulatory system they brought in during their term in power absolutely failed the British public.

Several hon. Members: rose -

Justine Greening: I will give way. I see that Labour Members have now perked up from when they were skimming over their past, as they were so clearly intent on doing. It is more difficult for them, is it not, to hear the failures of their Government being set out so clearly? Let us not forget that the last Prime Minister, back in 2007, described this as a golden age. He obviously felt that the regulatory system he had put in place was a great one, but that was subsequently proved not to be the case.

Chuka Umunna: Does the Minister not accept that there was move towards a light-touch regulatory model across the entire political system? I am well aware of this because I used to work in the industry myself, and I do not recall the Economic Secretary or any of her colleagues jumping up and down when the Financial Services and Markets Bill went through this House, complaining that it did not introduce stronger regulation. Secondly, did she, like me, hear the comments of the Governor of the Bank of England, Mervyn King at the Treasury Select Committee this summer? He was asked whether, if the new regulatory model championed by the Minister had been adopted, the global financial crisis would have been averted-and he said no.

Justine Greening: If the hon. Gentleman checked the  Hansard of our debates on the original tripartite regulatory system, he would see that we did raise concerns about the nature of that system. We were told that our warnings were wrong. It is not acceptable for Labour Members simply to wash their hands of the regulatory system that they now clearly feel absolutely failed.
	In fact, we have to respond to the regulatory failures of the past by returning the role of supervising the banks to the body charged with the overall monitoring of the economy-the Bank of England. That is why we have also set up the Independent Commission on Banking to advise on the reforms necessary to ensure that we are better protected against another banking meltdown in the future.

Stewart Hosie: On that point, I entirely agree with the Minister. A fundamental part of this is the new capital requirements under Basel 3-some 7% higher for at-risk banks. Does she not agree, however, that a review of bank taxation, along with the Bank commission and the new Basel 3 regulations would be sensible to ensure that we have the balance in the round between taxation and capitalisation, risk and regulation, and supervision both at the UK level and with respect to this rather complicated European structure?

Justine Greening: The hon. Gentleman is right that the bank levy itself needs to be viewed in the context of overall policy. He is right that it is not just about the bank levy; we have to look at it in the light of the broader changes around regulatory reform and the work of the Independent Commission on Banking. I will shortly come on to explain what that means for new clause 3.
	We know that we have to tackle the regulatory failures of the past. We also know that it is right that banks make a contribution in respect of the risks they pose to the UK economy, but there is no benefit in taking action that would simply drive banks abroad. As the hon. Member for Islwyn (Chris Evans) pointed out, hundreds of thousands of jobs across the UK depend on Britain being competitive in this industry. For the financial services sector as a whole, as of June 2009, it had 1 million employees. The jobs are not just in London and the south-east, as there are nearly 100,000 people employed within the financial services industry in the north-west, while there are between 69,000 and 70,000 people employed by that industry in the east of England and about 90,000 in Scotland. Although there have been serious failures in the past, we also have to remember that many of the jobs that are part of this overall sector do not bring in high incomes, as the hon. Gentleman pointed out.

Christopher Leslie: I am following the hon. Lady's logic. She is saying that we do not want to do anything that would drive the banks away-that old chestnut again-but is she seriously saying that the proposal in the new clause to have a review of the level of taxation would be enough to frighten them all offshore? Is she really saying that?

Justine Greening: I am sure that the hon. Gentleman is following my comments closely. I was setting out the context for the situation in which we find ourselves. I have pointed to serious regulatory failure, which needs to be sorted out, and the fact that we have inherited a huge fiscal deficit, which also needs to be sorted out. In that context, we should recall that the previous Government had said that they would not introduce a bank levy at the national level and that they wanted international agreement before any such levy were put into place. At that time, we argued that we should get on with that, as a Government, and not necessarily wait for international agreement. The Labour Government rejected that.
	In our first Budget, we decided to introduce a permanent levy on banks, which we expect to generate about £2.5 billion of revenue each year. The levy reflects the potential risks that banks pose to the UK's financial system and the wider economy, and it will ensure that banks make an appropriate contribution to deficit reduction that balances fairness with the competitiveness of the UK banking sector. It is also intended to encourage banks to move away from risky funding models that threaten the stability of the financial sector.
	We were the first country in the G20 to take such action-the hon. Member for Streatham (Mr Umunna) talked about leadership, and I think this is leadership-and we have been joined by France and Germany, which made announcements on bank levies in June. Germany's plans for its bank levy have been before Parliament there, while France outlined the details of its bank levy at its budget in September. Hungary, Portugal and Austria have since also outlined plans to introduce bank levies, while Sweden has already introduced a levy. Our bank levy is a permanent one and a regular source of revenue-unlike the one-off bonus tax of the previous Administration.

Chuka Umunna: What does the Minister say to the International Monetary Fund? I have already mentioned the IMF's views on the level at which this levy should be imposed. Conservative Members are fond of quoting the IMF to us time and again, yet the IMF takes the view that at least £6 billion a year can be raised from this levy. Does she agree with the IMF and, if not, why does she think it is wrong?

Justine Greening: The IMF has expressed its own views around levels of taxation. In the broader international context, which the hon. Member for Nottingham East (Chris Leslie) mentioned, there are questions about the introduction of a financial transaction tax and a financial activities tax. Unlike the hon. Gentleman's party, we were prepared to introduce a bank levy nationally, but there are also discussions taking place about international measures that might be taken.
	In fact, over and above the bank levy, the Government are taking a tougher approach to tackling tax avoidance by the banks. Prior to the spending review, only four of the top 15 banks had adopted the previous Government's code of practice. We have asked Her Majesty's Revenue and Customs to work with banks to make sure they adopt and implement the code by the end of this month, thereby making the commitment to comply with both the letter and the spirit of the law, and not to engage in or promote tax avoidance.
	New Clause 3 provides:
	"The Treasury shall publish a report before the 2011 Budget examining the level of taxation on the banking and financial services industry."
	We have had some sort of rationale for it, but I have to say that I see little merit in making such a report in isolation. The report itself would be no substitute for the overall strategy for improved regulation and the complementary bank levy ensuring banks make a contribution in respect of the risk they pose to the financial system and wider economy. As set out in the spending review, the Government will continue to monitor tax receipts from the banking sector to ensure that banks make a fair and growing contribution to the public finances as the economy recovers.
	In addition, there are, of course, already statistics available on the amount of tax revenue derived from the financial services sector. Historical figures for corporation tax receipts paid by several broadly defined business sectors are regularly updated and published on the HMRC national statistics website. To improve predictability, it is important that the Government provide clarity on the direction of tax policy, and the vehicle through which that is best delivered is the Budget itself. The new clause would require the Government to produce a superfluous report in advance of the Budget and therefore in advance of any announcements that the Chancellor might wish to make about tax policy generally that might impact on the banking and financial services industries.
	The Opposition want a report on the banking industry. What the Government want, and what we have, is a strategy to ensure that the financial services sector pays its fair share. We have been clear about what we want to achieve, not only through the bank levy but through the code of practice, and by fixing the banks' ineffective regulatory system-the system established by the last Government, who let our country down so badly. The new clause does nothing to support those aims, and I ask the hon. Member for Nottingham East to withdraw it. If he is not willing to do so, an apology to the British people for the mess of a regulatory scheme that he left behind would not go amiss.

Christopher Leslie: What cheek the Minister has to start claiming, in that revisionist way, that her party was always saying that it wanted heavier regulation of the banks in the 1980s and 1990s, and that the Labour party was always advocating the lightest of light touches.
	The Minister has completely failed to address the substance of the new clause. We were not even arguing for a change of policy, although I think that we may deal with that on another occasion; we were simply asking for a review of the levels of tax paid by the banks. The Minister did not address that. Nor did she address the issue of bankability. My hon. Friend the Member for Islwyn (Chris Evans) rightly distinguished between lower-paid employees in the banking sector and the high-rolling, highly paid bonus recipients who are in a league of their own.
	The Government have taken no action on banker bonuses, despite all their rhetoric. As my hon. Friend the Member for Streatham (Mr Umunna) pointed out, although the Government had claimed earlier that they wanted to see the banks paying their fair share, they were quite happy to set the banking levy at a puny level. It was interesting to note that the Minister body-swerved the point about the IMF's suggestion that the levy should be higher, and I think that we should examine that methodology on another occasion.
	My hon. Friend the Member for Scunthorpe (Nic Dakin) rightly observed that new clause 3 simply seeks transparency and accountability-which must be an important part of proving that we are genuinely all in it together, as the Government like to claim. The Government are going to hit the public generally, cutting services, abolishing education maintenance allowances, taxing child benefit and raising VAT; yet they are unable to do anything about the banks.
	We accept that the Independent Commission on Banking is investigating the matter and that regulatory reform is needed, but why can we not have a review of the level of taxes? That is all that we are asking for. What are the Government scared of? They have not given us an answer, and I think that we should divide the House.

Chris Bryant: On a point of order, Mr Deputy Speaker. I have never seen you in the gym, although you may visit it regularly, but when I was there earlier this evening, the Division Bell did not ring. I do not know whether it did not ring in other parts of the estate, but I hope that it will ring on this occasion-although I am here now.

Nigel Evans: Funnily enough, that is a point of order for me. It may be the first that I have taken.
	I do go to the gym, although I do not go to the one to which the hon. Gentleman has referred. I thank him for giving me notice of his point of order. I have asked for someone to be in the gym in time for the next Division in order to ascertain whether the bells are working normally. The hon. Gentleman should be reassured that the matter is being investigated as we speak.

Question put, That the clause be read a Second time.
	 The House proceeded to a Division.
	Mr Deputy Speaker: Order. It has been brought to my attention that there is a problem with the Division bells not only in the gym, but in other parts of the parliamentary estate. I am therefore giving Members a further two minutes to vote in the current Division. In the meantime, may I ask that the bells be investigated in Norman Shaw North as well as in the gym? I also advise all Members to be attentive to the monitors as well as the Division bells, because there may be more Divisions this evening.
	 The House having divided: Ayes 213, Noes 306.

Question accordingly negatived.

New Clause 5
	 — 
	Definition of 'incapacitated person'

'(1) The Taxes Management Act 1970, section 118 is amended as follows.
	(2) In subsection (1), the definition of "incapacitated person" is substituted as follows:
	"'incapacitated person' means any person under the age of 18 years or who, within the meaning of section 2(1) of the Mental Capacity Act 2005, lacks capacity in relation to tax or financial matters.".'.- (Chris Leslie.)
	 Brought up, and read the First time.

Christopher Leslie: I beg to move, That the clause be read a Second time.
	New clause 5 takes us into completely different territory from that of the previous debate, and it picks up on a discussion we had in Committee about the legal definition of incapacitated persons. Committee members were concerned by the outdated nature of some of our tax law, under which antiquated terminology can often still find its way into our tax regime through extracts from statutes simply being cut and pasted into today's legislation.
	One such anomaly concerns a definition in the Taxes Management Act 1970, which I am told is still very much a cornerstone of our tax law. It defines an "incapacitated person" as
	"any infant, person of unsound mind, lunatic, idiot or insane person".
	Those terms of reference are clearly insulting and demeaning to people who would be regarded as incapacitated. Not only is it out of date for those terms of reference to be extant in our legislation, but it is hurtful to those individuals who may suffer from incapacitation to be categorised and described in such derogatory terms. That definition derives from the 19th century lunacy Acts and today appears grotesquely at odds with modern terminology, and this insulting state of affairs ought to have been reformed many years ago. That definition relates to section 72 of the 1970 Act, which says that an incapacitated person's tax liabilities should apply to their
	"trustee, guardian, tutor, curator or committee"
	as if to a non-incapacitated person.
	In Committee, we pressed Ministers to concede this small and surely non-controversial reform. We did not feel that it was a matter of party politicking; after all, it should not be a dividing line between the parties. The new clause is simply and straightforwardly about replacing and modernising the definition of an "incapacitated person" and aligning it with the meaning in the more modern and more appropriate Mental Capacity Act 2005, whose far more flexible and sophisticated definition is less hurtful in tone and more precise in its interpretation. It states:
	"For the purposes of this Act, a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain."
	That is a far more appropriate definition.
	By updating the definition, we would also update provisions to encompass new arrangements relating to trusteeships. For example, the new arrangements would also modernise those of donees of powers of attorney, who would be properly included in the legal definitions, as well as those of Department for Work and Pensions appointees. I should like to thank the Chartered Institute of Taxation's low incomes tax reform group-LITRG-for highlighting the issue consistently. It has been championing this minor technical change in the law for at least seven years and has been promised on numerous occasions that, "A tax law rewrite is just around the corner", "More time is needed for consultation" and so on. I gather that it has been having discussions with officials, following our discussion in Committee. Although LITRG may have cause to trust the Minister's officials, I believe that time is running out for this change to be made. When the Minister was unable to concede on this point in Committee, I said that we would try to have this debate on the Floor of the House because of the importance and urgency of making this reform.
	It is a pity that the Minister has not tabled a Government new clause on Report, but I shall wait to hear what he has to say. We did try to reflect on the points that he raised in Committee. The provision that we had tabled then did not refer specifically to children and we have rectified that by making the appropriate change for the Report stage. As far as I can see, this new clause has no revenue implications and there is no clear reason for any Member to dispute the need to modernise this terminology. There is clear evidence that people are hurt and insulted by the terminology from a bygone age. It therefore seemed sensible to put this point again on Report, and I urge the Minister to accept the new clause.

David Gauke: As we have heard, new clause 5 seeks to change the definition in the Taxes Management Act 1970 of an "incapacitated person". I appreciate that the purpose of the new clause is not to change the scope of the definition, but to ensure that it better reflects the modern understanding of an "incapacitated person". Members of the Committee will recall that we debated a similar proposal at the end of the Committee stage. As I explained then, a definition is required to ensure that the obligations of the 1970 Act properly fall to those acting for children or for those with mental health problems. The existing definition can be traced back to at least 1880, and I reiterate that I agree that the wording used, such as "lunatic" or "idiot", no longer feels appropriate, belonging as it does to the Victorian age, rather than to today's times.
	Before I address the wording used in this new clause, I wish to reiterate to Opposition Members that I welcome this issue having been raised and am willing to take action. That is not an empty promise: I asked my officials to explore quickly what they thought was possible with the low incomes tax reform group. We now better understand what that group wants to achieve and the complexities involved. My officials are working with LITRG and are willing to listen to it and to others about how best to achieve these objectives.
	LITRG thought that it should be feasible to change the definition in the next year or two, and I am confident that the Government can work to that timetable in a carefully considered way. In contrast, I do not think that the new clause achieves its objective, nor do I think it is the most appropriate way to make this change. It, like its predecessor debated in Committee, seeks to link the 1970 Act definition of an "incapacitated person" to the Mental Capacity Act 2005.
	The provision debated in Committee failed to take into account the fact that children were also included within the existing legal definition of an "incapacitated person". The revised new clause seeks to remedy that position by including
	"any person under the age of 18".
	Once again, I point out that the provision remains deficient, as the definition would inadvertently include Scottish people between the ages of 16 and 18, who are not included within the current definition for most purposes of the 1970 Act. I do not think that the reclassification of that group in a way that is contrary to the position in Scotland is the intention of Labour Members.
	In addition, our preliminary discussions have revealed that the reference to the 2005 Act may well create a different definition in practice. The current definition refers to a person's general mental condition, whereas this provision would depend upon an analysis of a person's capability at a specific point in time, and the implications of such a change may be significant. It would be irresponsible to make such a change without considering these potential differences thoroughly with the appropriate representative bodies.
	The repeated technical difficulties demonstrated in the new clauses serve only to reinforce the point I made in Committee that such changes should not be made in haste, for fear of inadvertently moving groups of persons in or out of the definition. As hon. Members will be aware, the Treasury launched a new approach to tax policy making alongside the June Budget.

Sheila Gilmore: Earlier today I made the point, on another matter, that it may be unwise to reform in haste and repent at leisure. I am very pleased that the Minister has now decided to agree with me.

David Gauke: I am delighted if that is how the hon. Lady interprets my remarks, and if that pleases her, it pleases me.
	In June, we produced our paper on the making of tax policy and we believe that it is very important to adopt a deliberative and consultative approach and, wherever possible, to consult thoroughly. We wish to avoid the experience of making reactive and piecemeal policy announcements that have been insufficiently thought through and result in unexpected consequences-we saw too much of that under the previous Government. Instead, we believe that appropriate consideration should be given to changes, thus providing an opportunity for those affected to comment and have certainty about our decisions. Any change on this matter should go through that process to ensure that we can come to this House with legislation that will work as intended.
	Let me be clear that I agree that the wording in the current definition is outdated and that I am committed to delivering change. As I have said, my officials have already started to work with LITRG and will work with other groups that have the expertise to ensure that we get this right. The hon. Member for Nottingham East (Chris Leslie) has alluded to the fact that LITRG is happy to work with Treasury officials and accepts the need to get this right. I believe that it will be possible to deliver change to the definition in the next couple of years along the timetable that LITRG accepts.
	I ask the hon. Member for Nottingham East not to press his new clause to a vote, but I hope that he will engage with us on how to make the change behind the clause that we both agree is necessary. I am grateful to him for raising the issue in Committee and today. I agree that this should not be a matter of party political dividing lines and we will seek to address it. It has been of long-standing concern, but the Government are determined to address it, so I ask him to withdraw the clause.

Christopher Leslie: I am impressed that the Minister has taken the time to encourage his officials to meet LITRG. I am pleased that he agrees about the outdated nature of some of these archaic terms: "idiot", "lunatic", "insane" and so on should not be part of our modern legislative lexicon. I am interested that yet again he manages to find a flaw in the drafting. It is almost like one of those circular nightmares: no matter what point any Opposition party makes to any Government, there is always a desire to resist by pointing out drafting and terminological problems. I think that the Minister accepts the spirit in which we have been trying to raise this issue.
	I agree entirely that it is important to take whatever time is necessary to frame the definitions correctly in law, but we are not talking about designing a whole new regulatory regime for financial services or some convoluted way of taxing child benefit. We are simply talking about a minor change to modernise the terminology in tax law. I am still slightly sceptical about the argument that we need to take another couple of years to do so.

Eilidh Whiteford: Does the hon. Gentleman agree that it is important that any proposals work for the whole of the UK and not just for one or two parts of it?

Christopher Leslie: Indeed, and that is probably why on this occasion I am happy to accede to the Minister's request that Treasury officials be given more time to frame the change. However, I think that the patience of the House will be tested if we go for another seven years with these terms still in statute as we go through Finance Bill after Finance Bill after Finance Bill-we are going to have three, after all, this year, with another possibly coming shortly, although it is up to the Minister when that happens. I do not want to be back here tabling similar amendments. I hope that during the Minister's tenure, before he is promoted to even higher office-I accept that that is probably imminent, whenever the reshuffle might come-he will make a commitment, at least, to show that this was one reform that he was able to champion. I would be grateful for that. On that basis and in that hope, I am happy to beg to ask leave to withdraw the clause.
	 Clause, by leave, withdrawn.

Clause 4
	 — 
	Seafarers' earnings

Christopher Leslie: I beg to move amendment 1, in page 7, line 40, leave out clause 4.
	In Committee, we discussed the implications of clause 4, which I am happy to discuss again. It seeks to extend to seafarers resident in the European economic area the same 100% deduction from income tax of their earnings from employment as a seafarer wholly or partly outside the UK during an eligible period. I know that this is something about which many Members of the House will be very concerned.
	At present the tax relief is available only to those seafarers who are ordinarily resident in the UK, but there are clearly seafarers resident in other EEA states yet not ordinarily resident in the UK who might also warrant the seafarers' earnings deduction. The measure is listed in the Budget Red Book as costing the Exchequer £5 million annually and we debated the technical details of the clause, such as the navigation of waters beyond the UK continental shelf, how long would be spent away from the UK and how many seafarers are involved in the concession. The Minister said that it was in the order of 16,000.
	The Minister also helpfully explained that the clause was brought forward as a result of the European Commission's decision to challenge the compatibility of seafarers' earnings deductions with the UK's treaty obligations and to comply with our EU and EEA associations. It is welcome that the Conservative party is rushing to legislate to comply with these European arrangements. I know that some hon. Members-including the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne), who is sitting on the Front Bench opposite-will be more pro-European than others, but he seems to be persuading the Conservative party towards the pro-European stance. It is interesting that there is no dissent from that interpretation.
	In Committee I raised in particular a specific and contemporary issue that has been a subject of some controversy: the impact on the mackerel fishing dispute between UK and Icelandic fishermen. The clause is highly relevant and might have a significant bearing on that dispute, because if enacted it would grant to the Icelandic fishermen-and the Norwegians for that matter-a set of tax relief arrangements that would be very useful to them. I asked the Minister a series of questions on that, but he merely asserted in his indomitable way that the clause was "not relevant" to those discussions. So, I want to try again.
	Will the Minister say what discussions have taken place between the Government and the Governments of Norway and Iceland in the drafting of the provisions and in what respect they will be reciprocated for UK-resident seafarers in those countries? Has the Minister spoken with his counterparts in the Department for Environment, Food and Rural Affairs, the Scottish Executive-I know that some hon. Members will be interested to learn about that-and the FCO regarding the impact that the change might have on the sensitive negotiations between the EU, Norway and Iceland over the mackerel quota? I gather that the practice of the Icelandic fishing community unilaterally to declare a larger catch quota for valuable fish, risking the sustainability of fish stocks and disrupting previously settled agreements, has caused consternation in some quarters. Is it therefore appropriate for the Treasury to grant this tax concession to Icelandic fishermen while there is such great sensitivity?
	On Friday, I understand that the Icelandic ambassador to the UK, Benedikt Jonsson, met the chief executive of the Scottish Fishermen's Federation and others to discuss the mackerel dispute at a meeting in Aberdeen organised by the Icelandic consulate. I gather that "frank views", as they are often called, were exchanged about what constitutes responsible management of that mackerel quota. Iceland continues to assert its right to catch a significantly increased quota this year outside the bounds of the international agreements. What are the UK Government doing to bring the dispute to a sensible conclusion? Would it not be wise to pause on the gifting of the seafarers' earnings deduction to the Icelandic fishing community until such time that the question over the fair fishing of mackerel stocks is resolved?
	Other issues might be relevant, too. Are we, for instance, still confident that the relationships between the UK and Iceland are ensuring that our fiscal position is protected? For example, the UK ought to be getting money back from the collapse of Icesave and other Icelandic banks, but there have been recent suggestions, particularly resulting from protests in Iceland, that there might be some delay in repaying foreign creditors with the priority that is deserved. Is it sensible to be offering tax concessions to Iceland when such negotiations are going on? I understand that there are also some question marks over whether the EEA treaty arrangements necessarily require such a tax concession to be ceded to the Icelanders.
	I have asked a number of questions and I wonder whether the Minister can address them. They are not necessarily at the top of people's minds in every constituency in this country, but there are some corners of the country where this is a big issue. I would be grateful for the Minister's attention to it.

David Gauke: As we have heard, amendment 1 seeks to remove clause 4 on the seafarers' earnings deduction from the Bill. Doing so would prevent the extension of seafarers' earnings deductions to EEA resident seafarers. By way of background, it is worth pointing out that in November 2008 the European Commission sent a pre-infraction letter on this matter. The Commission stated that the rules for seafarers' earnings deductions are incompatible with the EU rules because the deduction is available only to seafarers who are ordinarily resident in the United Kingdom. After due consideration of the Commission's letter, the previous Government decided to respond by enacting a change in the law. Consequently, last year they said that they would legislate to extend the rules for this deduction, enabling European economic area resident seafarers from outside the UK to claim. The previous Government committed to implementing the change from April 2011.
	Given the expectations that were set by the previous Government, we decided that it was better to enact the changes this year. After the election, we decided to follow the same approach as the previous Government in response to the Commission's letter, although we postponed the legislating until this second Finance Bill of the Session. In July, the draft clause and explanatory notes were published along with the rest of this Bill. Only one response was received, from a professional body, and it did not raise any concerns about competition effects on UK seafarers. Other discussions with interest groups exposed no objections to the extension of the rules because it was felt that it would not have a significant impact on UK resident seafarers.
	Opposition Members are concerned that making such a change will benefit Icelandic and Norwegian fishermen, who compete with UK fishermen for their catch. In particular, the hon. Member for Nottingham East (Chris Leslie) raised the matter of the so-called mackerel war. Although I understand such a position, the clause will make no significant difference. The Government estimate that a maximum of 1,500 EEA resident seafarers will become entitled to claim seafarers' earnings deduction, at a potential cost of £5 million per annum. The numbers and amounts involved are relatively low because few non-UK resident seafarers pay income tax on their earnings in the United Kingdom. Non-resident seafarers are liable to UK tax on earnings in UK waters-that is within 12 miles of the shore-or if they visit a UK port. In reality, that means that they would probably be working in the UK or for UK businesses. Even if there were a liability to UK tax for such individuals, most double taxation agreements would give primary taxing rights to the home state, making the application of the deduction redundant.
	In practice, we estimate that about 4,000 non-UK resident seafarers pay income tax in the UK. As many of those are not EEA residents, we estimate that the extension of the entitlement to EEA residents would enable a maximum of 1,500 non-resident seafarers to claim the deduction.
	The Icelandic mackerel fishermen are most unlikely to be subject to United Kingdom taxation. First, many fishermen are self-employed, and so outside any entitlement to the deduction. Secondly, Icelandic fishermen would be entitled to claim the deduction only if they were employed to fish in UK waters or if they visited a UK port. It is unlikely that there are many Icelandic fishing vessels operating within 12 miles of the UK or landing their catch at our ports. Even if they did so, such individuals would still be subject to the double taxation agreement, which in almost all cases gives Iceland primary taxing rights over its resident seafarers.
	This Government take the mackerel fishing issue extremely seriously. The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon) has been engaging with his counterparts on this matter across Europe. We are disappointed that no agreement has yet been reached and we find the continuing action by Iceland unacceptable. We will consider further action in due course.
	The hon. Member for Nottingham East seems to have forgotten why this measure is being put in place and what the consequences are of not enacting it. If we passed amendment 1, the Commission would certainly take a significant and immediate interest, which could result in substantial uncertainty for UK seafarers. If we lose before the European Court of Justice, the result could be a fine from the European Commission of at least €11 million, and we would still have to enact the measure. To reject the amendment will mean an estimated cost of no more than £5 million per annum, with few -if any-consequences for the UK fishing fleet. I therefore ask the hon. Gentleman to withdraw his amendment.

Christopher Leslie: I am grateful to the Minister for his comments, which, given that he addressed some of the issues pertinent to the mackerel wars question in respect of arrangements for Icelandic fishermen-that was probably the biggest reason for the question mark over this clause-were certainly more thorough than those we had in Committee. He mentioned a couple of reasons why he did not feel that the measure would bite on that issue-if I may use that fishing pun. I am glad that he did not repeat his red herring claim against the amendment. The self-employment point was a fair one. He also said that the measure would hit only if there was a claim when Icelandic fishermen were landing their catches at UK ports and so forth. In particular, he talked about the European Court of Justice situation and the requirement that would fall on the UK and the consequences that would come from that. I know how much Members on the Government Benches are keen to abide by their European obligations. Given those strictures, I am happy to beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Third Reading

David Gauke: I beg to move, That the Bill be now read the Third time.
	We find ourselves in the unusual situation of having considered three Finance Bills this year. The first, as usual, was introduced following the May Budget, but was curtailed by the election. The second allowed this Government to enact measures that were deemed necessary to address the financial mess that was left to us. This third Bill has allowed this Government to take forward those technical and uncontroversial measures set out by the previous Administration. The nature and timing of this third Bill are a product of both the economic position and our commitment to improving future Finance Bills.
	The enormity of the challenges facing Britain was one of the catalysts for a brief, focused Finance Bill in the summer. As my right Hon. Friend the Prime Minister set out, private sector-led growth is at the centre of the changes that this Government need to make to avoid the mistakes of the previous Government. The first part of providing that must be macro-economic stability, which is why it was necessary to enact in the summer those policies that would quickly tackle Labour's deficit. Doing so restored the confidence in the economy of both the financial markets and the British people. Stable public finances are the only way in which to prevent higher interest rates, rising inflation and more taxes.
	Alongside such policies was the need to show that Britain is, once again, open for business. We have taken such steps and committed ourselves to more. In so doing, we have been opposed by Members on the Opposition Benches, particularly on our measures for growth. I am sure that many hon. Members will remember the hon. Member for Wallasey (Ms Eagle) invoking Lord Kitchener on Second Reading. I am more drawn to the words of Churchill, who contended that a people taxing themselves into prosperity is like a man standing in a bucket and trying to lift himself by the handle. That is why we are reducing the rates of corporation tax for large and small companies and removing nearly 1 million people from tax, and why we did not go ahead with Labour's jobs tax.
	It was because of the need to take such steps in the summer that a short, focused Bill was required, which meant that an additional Bill was needed in the autumn. However, this Bill has also been an opportunity for the Government to demonstrate how we will improve tax policy making. On 12 July, the clauses in the Bill were published in draft for consultation. More than 60 comments were received and resulted in changes to nine clauses. The publication of the clauses in draft followed the commitments set out in the June Budget. The changes will ensure greater predictability, fewer changes and better consultation. We have already made a good start on the first of those. Last week, my right hon. Friend the Chancellor announced the date of the Budget, four and a half months ahead of time. This evening, I can confirm that we will be publishing the majority of the clauses for the Finance Bill 2011 later this year. We will set out the draft clauses on 9 December.
	I have discussed the foundations of the Bill and the process that we will undertake for future Bills, but we should not forget the important measures before us. Clauses 1, 2, 3 and 16 will provide for fairer tax treatment for carers. Clauses 5 and 6 will assure the future of venture capital schemes, which have supported more than £10 billion of investment. The support to real estate investment trusts under clause 10 will allow them to meet their regulatory requirements more easily. The changes in clauses 19 to 22 ensure EU compliance on several technical but necessary issues. I shall not press this point, but I remind hon. Members of the important action that we are taking against long cigarettes and the tax avoidance connected with them.
	The Bill is a result of necessary action that was taken earlier in the year and of the greater scrutiny and consultation to which all future Bills will be subjected. Although it is not packed with headline measures, it will help many groups. It assists businesses and individuals, supports investment and benefits those in need. The Bill will make a real difference in the real world and I commend it to the House.

David Hanson: The Labour party predominantly supports the Bill. It had its genesis under the previous Labour Government when my right hon. Friend the Member for Edinburgh South West (Mr Darling) brought forward many of its measures. We give the Bill a warm reception, although we scrutinised it in Committee, as was our duty, as the Opposition.
	I was going to give the Minister a much warmer welcome than I might now do, but he raised several points that strayed beyond the Bill, even though they are important for the House to consider. There is a clear difference between the Government and the Opposition on public spending and taxation regimes over the next few years. Even during today's consideration of the Bill, we saw the clear differences between us on child benefit, taxation on banks and video game tax relief. We will return to such important issues in due course. They will frame the economic debate between the Government and the Opposition over the next 12 to 18 months, and we will watch closely how the backdrop to the Bill meets the needs of my constituents and those of my right hon. and hon. Friends in relation to employment, prosperity, taxation and the economic health of the United Kingdom, because we remain of the view that the Government are cutting too far, too fast, and that they will therefore damage the economy. However, let us put those matters to one side because they are not in the Bill.
	As I said, my right hon. Friend the Member for Edinburgh South West developed many of the policies in the Bill. The uncontroversial nature of the Bill is attested by the fact that there were only two Divisions in Committee. One was on the sittings motion, following a disagreement about a clash of business in Committee and on the Floor of the House-as a matter of good practice, we should try to avoid that in future. The other Division was on a matter of more significant principle: the definition of "incapacitated person". We had a rerun of that debate today.
	We support many of the detailed provisions in this technical Bill. It includes important measures on foster care relief and relief for adopters. It contains provisions to simplify value added tax and to address film tax credit. As the Minister said, it includes important measures to tackle the smuggling of cigarettes through its consideration of taxation regimes for long cigarettes. We support those measures, which were the subject of discussion in Committee. The Bill puts in place important and welcome green allowances as a kick-start for zero-emission goods vehicles. When we discussed those measures in Committee, there was broad support for their implementation.
	The Bill gives welcome support for asbestos-related trusts through taxation measures, including on capital gains tax. After we tested the Minister on those measures, we reached the conclusion that they were worthy of general support. We also support the clarification in the Bill on landfill tax.
	Try as I might in Committee, I could not find much in the Bill with which to disagree. However, our sittings allowed us to tease out the Government's thinking on a range of issues and to reflect the concerns of a number of outside bodies about the implementation of policy, rather than the policy itself.
	As hon. Members can see, Labour Members are so content with the Bill-and have such trust and faith in my ability-that they have left it to me to bring our proceedings on it to a close. Although we welcome the Bill, we will consider real differences between us regarding the economy of the United Kingdom on future days, and I look forward to those debates in due course.

Charlie Elphicke: As a member of the new intake, it was a privilege to serve on the Government side of the Pubic Bill Committee. I congratulate Ministers on ably putting forward the Government's case in Committee.
	This important Bill is one of the three key pieces of the Government's programme for the finances of the country-the first was the emergency Budget and the second was the comprehensive spending review. It forms part of the way in which we will start righting the finances of the nation. Only today we heard a lot of deficit denial from Labour Members, yet the nation needs its finances sorted out. We in Dover are trying to help to do that, in our small way, through the prospective sale of our port. We say, "Don't wait two years to flog it off overseas like Cadbury; let's get on and do it now, with a community mutual purchasing the port, to ensure that the Government get their money by the end of the financial year." Understandably, the harbour board is not pleased about that. Under its plans, it hopes to get millions for management, but I want millions for the people of Dover and the betterment of the community, just as the Government, through the Bill, seek the betterment of the nation as a whole.
	Our finances are in a bad state. We have a structural deficit of £109 billion a year. By the end of the Parliament, even after we have reined in the deficit, our debt will have increased by £292 billion, and that is before we get on to asking how we pay down the national debt. The key message of the Bill, the Budget and the comprehensive spending review is that we must stop debts mounting before we can pay down the mortgage. We must get the finances of the nation back under proper control and on a level keel.
	Just as I was privileged to be a member of the Public Bill Committee, I am privileged to support the Bill, and I congratulate Ministers on their excellent work.

Penny Mordaunt: I wish to start by briefly mentioning the public consultation on the Bill. During our discussions about the Bill and the comprehensive spending review, much was said about the previous Government's mismanagement of the economy and the behaviours that led them to spend £5 for every £4 that they brought in, but the systems that they put in place did not help either. The Minister has referred to the failure of regulation, but the previous Government's other practices-the prime example is their failure to hold a comprehensive spending review-hindered public and parliamentary scrutiny of their ability to manage the economy. That enabled a bad situation to escalate, with a scandalous overspend, as well as allowing them to adopt the shocking scorched earth policy in their death throes with which we are all familiar.
	I therefore welcome any move towards more transparency and public consultation. We have heard that Departments will publish business plans, and we were given reassurances in the summer that the clear line of sight project would allow us to see not just what Departments were spending, but what they were raising. In addition, consultation on Finance Bills is an extremely good innovation in the interests of quality and transparent Government. I hope that in future consultations, a broad audience beyond the usual tax practitioners will let their views be known to the Treasury. That will help to hold Governments to account, and it will certainly give us something interesting to talk about in Committee.
	With reference to the Bill, I welcome the amendment to collection procedures for income tax for individuals and the harmonisation of administration regimes for different taxes, which is a further advance towards simplification and transparency. I have received assurances on the issues that I raised on clauses 26 and 27 about the failure to make returns and late payment. I sought assurances that those measures would not overburden taxpayers or impose disproportionate penalties.
	I applaud first-year allowances for zero-emission goods vehicles, a genuine incentive for logistics firms to pursue a green agenda, and a sign of the Government's determination to reward green behaviour. In Committee, there was some discussion about what constituted a vehicle, which at the time I thought might be rather a waste of time, but given that earlier today, at Defence questions, an hon. Member managed to ask a question about aircraft carriers under the topic of vehicles, perhaps the discussion in Committee was not a waste of time at all.
	The clause that will be of most interest to my constituents is clause 31, because many people in Portsmouth North are suffering from asbestos-related illnesses. The clause will facilitate compensation payments and is a proper response to the tax liability to which many well intentioned trusts have found themselves exposed. Many of our constituents will suffer from asbestos-related industrial illnesses. The long period from exposure to presentation of symptoms, as well as lack of awareness, means that we will see new cases for decades to come.
	Currently, the trusts established to pay compensation to asbestos illness sufferers can be liable for inheritance tax, capital gains tax and income tax on their assets. Clause 31 will introduce a retrospective exemption for trusts established between 6 April 2006 and 23 March this year. Ultimately, that means more money going to victims, and it will be warmly welcomed in Portsmouth. I was reassured to learn during the debate in Committee that other trusts that do not fall into that time frame will not miss out. No trusts that might be affected have been set up since 23 March, and in future the problem can be avoided if new trusts fully consult the Charity Commission and HMRC. This is an extremely important clause in an important Bill, and I urge all hon. Members to support it.
	 Question put and agreed to.
	 Bill accordingly read the Third time and passed.

Business without Debate
	 — 
	delegated legislation

Lindsay Hoyle: With the leave of the House, we shall take motions 3 to 12 together.
	 Motion made, and Question put forthwith (Standing Order No. 118(6)),

Health Care and Associated Professions

That the draft Medical Profession (Responsible Officers) Regulations 2010, which were laid before the House on 26 July, be approved.

European Union

That the draft European Communities (Definition of Treaties) (Côte d'Ivoire Economic Partnership Agreement) Order 2010, which was laid before this House on 11 October, be approved.
	That the draft European Communities (Definition of Treaties) (Central Africa Interim Economic Partnership Agreement) Order 2010, which was laid before this House on 11 October, be approved.

Value Added Tax

That the Value Added Tax (Emissions Allowances) Order 2010 (S.I., 2010, No. 2549), dated 19 October 2010, a copy of which was laid before this House on 20 October, be approved.

Taxes

That the draft Tax Avoidance Schemes (Penalty) (Amendment) Regulations 2010, which were laid before this House on 13 October, be approved.

Capital Gains Tax

That the draft Double Taxation Relief and International Tax Enforcement (Austria) Order 2010, which was laid before this House on 15 July, be approved.
	That the draft Double Taxation Relief and International Tax Enforcement (Mexico) Order 2010, which was laid before this House on 15 July, be approved.
	That the draft Double Taxation Relief and International Tax Enforcement (Singapore) Order 2010, which was laid before this House on 15 July, be approved.
	That the draft Double Taxation Relief and International Tax Enforcement (Switzerland) Order 2010, which was laid before this House on 15 July, be approved.
	That the draft Double Taxation Relief and International Tax Enforcement (Oman) Order 2010, which was laid before this House on 15 July, be approved.- (Jeremy Wright.)

Political and Constitutional Reform

Ordered,
	That Catherine McKinnell be discharged from the Political and Constitutional Reform Committee and Mr Fabian Hamilton be added. -( Mr Heath.)

FINANCE AND SERVICES

Ordered,
	That Luciana Berger be discharged from the Finance and Services Committee and Mr Clive Betts be added. -( Mr  Francois, on behalf of the Committee of Selection.)

Mr Deputy Speaker: Nominations closed at 5 pm today for the by-election for the two Labour members of the Backbench Business Committee. Two nominations were received. A ballot will therefore not be held tomorrow. I congratulate Ian Mearns and Mr George Mudie on their election as members of the said Committee.

RECONSTRUCTING GAZA

Motion made, and Question proposed, That this House do now adjourn. -(Jeremy Wright.)

Julian Huppert: Thank you, Mr Deputy Speaker, for granting me this debate, and particularly for granting it to me so early in the evening. Before I start, I refer Members to my entry in the register and the fact that I was funded by Sir Joseph Houghton trust for a recent three-day visit to Gaza. I was joined by my hon. Friends the Members for Bradford East (Mr Ward) and for Gloucester (Richard Graham), whom I hope to see shortly in their places. We were also joined by Lord Warner. I would like to thank Graham Bambrough and Ed Parsons from the Council for Arab-British Understanding, and all those whom we met in Gaza.
	It is entirely as a result of that trip that I requested this debate, to feed back in a public venue the thoughts and reflections that I and my colleagues had while we were there. I should say that I also had other private meetings ahead of this debate, with the Minister and with the deputy Israeli ambassador, Mr Roth-Snir, for which I thank them both.
	It is worth noting that our delegation was not allowed to cross between Gaza and Israel, and as a result it was, sadly, not possible to talk to people on both sides of the blockade, which we would very much have liked to do. May I, through the Minister, suggest to Israel that its interests may be better served by facilitating people to visit it, as well as Gaza?
	My purpose in this debate is not to explore the history of the conflict, which has been done extensively elsewhere, and which, I think, does not do any participant proud. Sadly, discussions of the past were all too prevalent in our visit, with discussions going back as far as 1286. Instead, I want to focus on the present and on the future. But first, I believe that we do have shared goals that we all wish to see. Israel has a clear right to exist, and for its citizens to live in peace and security. The Palestinians have a clear right to have a fully potent state, with self-determination and autonomy.
	Currently, Palestine does not have a truly functioning state or security, and Israel is concerned that it does not have the safety that it needs. Unfortunately, despite the ever ongoing peace talks, I fear that both sides are headed away from those goals.
	One cycle of recent events began when Hamas won the elections in both Gaza and the west bank, under the banner, "Reform and Change". Although I am no supporter of Hamas, it was poorly served by the west, which told it that it could stand in those elections only if it agreed to change its name and its platform. It did so and, in what seem to have been legitimate elections, won but was not recognised either in its own right or as part of a joint Government with Fatah. We need to learn the lessons, and consider more carefully how to respond when people whom we do not like win elections.

Kerry McCarthy: I was out in the west bank as an election observer during the very elections that the hon. Gentleman has mentioned. He said that they were seen to be fair and impartial. It goes a little further than that, in that although people from the Carter delegation and the EU delegation and the British MPs who visited found minor things wrong with the way in which the elections were conducted, generally speaking there was an incredible turnout and there was very little on which we could challenge the elections.

Julian Huppert: I thank the hon. Lady for commenting. It is great to have the vision of somebody who was there and saw what happened. Whatever we think of the election result, Hamas clearly won it.
	That led to the situation that we see now-a Fatah takeover in the west bank, and a Hamas takeover in Gaza, and to the events with which we are all too familiar: the rockets fired into Israel; Operation Cast Lead, with Israel killing 1,300 Palestinians, including 352 children; brutal repression of Hamas by Fatah and of Fatah by Hamas; the kidnapping of Gilad Shalit; the illegal blockade and siege of Gaza by Israel and Egypt; and the assault on the flotilla bringing aid to Gaza.
	In our visit to Gaza, we saw a population who felt under siege, trapped inside their own small strip of land, and overcrowded-an intelligent, peaceful population, desperate for education and opportunity.

Cathy Jamieson: Can the hon. Gentleman say a little more about what the young people told him and what message they sent about what they want us to do to ensure that they are assisted with their education?

Julian Huppert: I thank the hon. Lady for intervening on that issue, and I shall come on to develop some of those points.
	I was struck by the tolerance. We attended a human rights lesson at one of the United Nations Relief and Works Agency-run schools, where the pupils were asked about tolerance. One of the questions was, "How should you respond to people who are not tolerant of you?" and I thought that the response from one young lady was fantastic. She said, "You should be tolerant of them to show them what they ought to be doing," and a lot of that is taking place, certainly in the UN schools. The message was, "We should be acting and listening. People should pay attention and help."
	We did not see a huge humanitarian crisis while we were in Gaza, but that is largely down to the excellent work of UNRWA, which has been in place, providing housing, food and education since 1949, and its excellent director, John Ging, who has been in place for a rather shorter period. In that short time, however, he has already had to witness his own UN compound being shelled by Israel.
	UNRWA does amazing work, and I think that I speak for all of us who went on the visit when I say that we were very impressed by the range and quality of provision, from housing for refugees to schooling for their children, from women's centres to summer camps. It was clear as we drove around in UNRWA vehicles that its work is well supported by the general public, with children cheering the cars as we drove by, but its ability to play that critical role is under threat.
	Although the blockade around Gaza has been lifted somewhat, there are still great concerns, because the construction equipment that should be able to enter Gaza legitimately comes under a lot of scrutiny and is often not allowed in. The crossing at Sofa, which is intended for construction materials, has been closed since 2008, and, although some material is allowed in at other crossings, it is fairly minimal and unreliable. We were told of UNRWA-led housing schemes, which aim to deal with housing shortages and to replace refugee homes that have stood for too long and buildings that were destroyed or damaged during Operation Cast Lead. Those schemes are funded by the international community, including the European Union, but they either cannot go ahead or they go ahead very slowly, because Israel will not allow in the cement and steel bars to build them.
	We heard of a crisis in UNRWA-led education, which is far more liberal than that in the Hamas-controlled Palestinian Authority schools and even includes a course on the holocaust. However, despite the fact that most UNRWA schools are double-shifted, with separate classes in the morning and the afternoon, there are about 40,000 refugee children who should be educated by UNRWA but are not, because of a lack of buildings. The money for eight much-needed new schools and two extensions has been obtained, the plans have been prepared and the contracts have been let, but the materials struggle to get in. While we were there, of the 48 trucks bringing in materials for the schools, 47 were turned back for no clear reason.
	I raised the matter in International Development questions on 13 October, and the Minister of State, Department for International Development, agreed:
	"Schools must be rebuilt, and we certainly urge the Israelis to ensure that any materials that can be used for the essential reconstruction of schools and the like can be allowed through." -[ Official Report, 13 October 2010; Vol. 516, c.316.]
	I hope that he and the question have had some effect, because on Friday I heard from the Israeli embassy that approval had been granted for the eight schools, the two extensions and for two clinic centres, and that building materials will be allowed into Gaza in accordance with the building work.

Richard Graham: My hon. Friend speaks eloquently about our visit, and I agree with all the points he has made. Does he agree that the slowness in building those schools, which Israel has already approved from a list of 13 projects, is partly due to the fact that the crossing in Karni is not properly open? Of the 404 trucks for which UNRWA requested permission to enter Gaza, only 70 have so far done so. Does he agree that that is a crucial issue, and one on which we would be grateful for the help of the Minister here tonight?

Julian Huppert: Indeed, and I thank the hon. Gentleman for going on the visit. It was a great pleasure to share many experiences while we were there. He is absolutely right. One can look at different time scales, and his figures date back to 3 October if I recognise them correctly, but in general UNRWA says that only about 1.7% of the material that it requires is allowed in. Indeed, as he says, the Karni crossing is open only two days a week. It could be open six days a week. The Sofa crossing could be open, and we could allow for the transfer of construction materials at Kerem Shalom. I am delighted, however, that we seem to be making progress on those schools, because the materials for them were our number one priority after the visit.

Kerry McCarthy: It seems entirely counter-productive not to allow through those construction materials, when, as the hon. Gentleman says, the UNRWA schools are far more moderate in their teachings than the Hamas-led schools. I appreciate that he did not have a chance to visit Israel and hold meetings there, but did he receive any feedback on why there are delays, and why there is no real push or zeal on the part of the Israeli authorities to get those schools built?

Julian Huppert: That is a fascinating question. I thank the hon. Lady for raising it, and in a moment I shall refer to what I have heard about the situation.
	I am delighted about the schools, but we should be cautious. Approvals have been given in the past and then withdrawn, and allowing such basic building materials in should be a standard right, not a long drawn-out victory, but I thank the embassy for its information and urge the Minister to monitor carefully the progress on those projects, and to make the strongest protests possible if the flow of materials for those projects is curtailed. I hope he will agree to that.
	On the question the hon. Lady asked, the argument used by Israel for not allowing construction materials in for these and other projects is one of security. The argument is that such materials-and there is a relatively long banned list, although it is better than it used to be-could be used by Hamas for military purposes. That argument makes sense superficially, and Israel does of course have a legitimate reason for wanting to control materials that could be used to make rockets, but it falls apart on closer examination.
	It is well known that there are hundreds of tunnels under the border with Egypt which are used for smuggling. At the peak of the blockade, there were 1,200, including some large enough to drive a car through. We went into one-not the whole way, I hasten to add-and they are impressively constructed. At its peak, we were told, the value of the tunnel economy was between $500 million and $700 million a year, although the relaxation of the blockade on food and similar consumer goods has reduced activity significantly. The taxes that Hamas levies on imports through the tunnels provide a significant income to that organisation, helping to fund its activities and to buy up land and businesses throughout Gaza. However, those tunnels provide a regular supply of building materials, and we saw trucks being loaded with large amounts of cement and steel bars, along with signs throughout Gaza of construction works.
	We found it ironic and deeply concerning that Hamas and related private individuals can have all the materials they need to build anything, from apartment blocks to bunkers, while the only effective constraints appear to be on the UN, non-governmental organisations and legitimate businessmen. That is surely counter-productive to Israel's interests. It also serves to weaken UNRWA, which risks losing support through its inability to build while others are able to, because it is of course not prepared to use illegal materials. Given the flow of materials through the tunnels, Hamas can quite easily obtain any military equipment it requires, without having to try to acquire goods via the Israeli border.
	Egypt plays an important role in the area. Indeed, we entered Gaza through Egypt. The press rarely highlights the fact that Egypt maintains a blockade on people movement in Gaza, just as Israel does, largely out of fear of the spread of Hamas ideology. However, Egypt could easily close down the tunnels if there was a desire to do so centrally, and if local military and police commanders were prepared to act-although that might go against their financial interests.

David Ward: Was my hon. Friend as amused as I was by the secret, hidden tunnels from which one could wave at the Egyptian border guards who were apparently unaware of their existence?

Julian Huppert: I thank my hon. Friend for intervening. It was a great pleasure to have him on the trip as well, and yes, it is absolutely absurd to imagine that Egypt does not know about the tunnels, when one can drive along and see large tents. One has to speculate on how materials suddenly, magically appear out of them. Egypt could find those tunnels on the other side of the border as well, and the trucks that go backwards and forwards to supply could surely be found, too. There is a considerable Egyptian presence of tourist police and other organisations, as anyone who has been there will know.
	Egypt is concerned about Hamas ideology, and it was fascinating to discover how broad the Hamas support base is, along with the spectrum that it covers, from reformers to hard-liners. It was also interesting to see how some of the more extremist Islamic groups there consider Hamas to be far too moderate. Those groups have been involved in many recent attacks on Israel, and Hamas has where possible put them down brutally. The feeling is often reciprocated.
	While I am on the subject of tunnels and imports of materials, let me mention the lack of exports and the effect that that has on the economy. Exports have been barred since June 2007, with minimal exceptions: there have been a few shipments of strawberries and carnations. This does not make for a serious export market or a way of earning income for a country. I was fascinated to find that some entrepreneurial Gazans use the internet to do paid work, but that is very much in its infancy and cannot be a substitute for a proper export economy. I note in passing that one of our party inadvertently left a medical device behind in Gaza, and we are still struggling to find a way to get it back again. Without exports, there is no hope of the Gazan economy starting to re-function. The collapse of the economy has led to 40% unemployment rates, and 60% youth unemployment. These are not good conditions for a transition to a more peaceful solution.
	There are problems with the provision of fresh water and with sanitation, and we heard about the desperate struggle to undertake rebuilding projects of those kinds as well. On physical construction, we need to think ahead. When the next Operation Cast Lead happens-we all hope that it will not happen-what steps will the Minister be taking to ensure that any future assaults by Israel would not blow up the provisions that we in the international community paid to have built? We need to ensure that we are improving Gaza, not stuck in a cycle.
	Reconstruction is not just about the economy or just about infrastructure; mental reconstruction is also an issue. We met a fascinating gentleman called Iyad Saraj from the Gaza community mental health programme, as well as people from other non-governmental organisations that operate there, who made it clear how much psychological harm is being done to Gazan residents, especially children. As well as the traumatic events of Operation Cast Lead and other Israeli assaults, there is a sense of imprisonment in what the Prime Minister has called a "prison camp". There are 800,000 under-18s in a population of 1.5 million, and more than half of them have never left Gaza.
	Serious construction is needed in leadership. Time and again, we heard of the desperate shortage of leadership on all sides. The ongoing feud between Hamas and Fatah exemplifies the suggestions that they are each more interested in their own interests. There is a long history between the factions, and an urgent need for them to overcome their differences. Talks facilitated by Egypt have been ongoing for two years, but are still unresolved. At the intended signing of the deal recently, there were five remaining differences, which have now been reduced to one-security. However, the talks on this issue that were supposed to start on 20 October fell apart almost immediately, and it is now urgent for these two factions to unite if they are to be able to represent the Palestinian people.
	We were told on several occasions that some exciting visitors from Britain had come to visit. Gerry Adams went to Gaza to give advice to Hamas. Of course, he is in a unique position to do so, with the benefit of detailed experience of armed uprising. In his comments, as reported to us, he said that there is a time to stop fighting, and that in Northern Ireland they had waited too long, increasing the death count for no benefit; and he argued that Hamas had gone beyond that point. I hope that he is heeded. Hamas has also been in talks with the African National Congress and with bodies around the world. It is not clear, however, that there is a Palestinian leader who can be Gerry Adams, Nelson Mandela, or anyone even close; it seems that there is no one who can take the dramatic steps required for peace to be serious. Hamas will not take steps to amend its founding, and outdated, charter. There is no one who will release Gilad Shalit, who has been held by Hamas for more than four years.
	However, there is leadership in other places. I would highlight the leadership in human rights provided by Jaber Wishah of the Palestinian Centre for Human Rights. He was jailed by Israel for his part in fighting against the Israelis, and he spent many years in jail, but while he was there he decided to renounce violence, and he now dedicates himself to fighting fearlessly for human rights throughout Gaza, courageously reporting infringements by Palestinian and Israeli alike against people from any background. It was a privilege to meet him; we need more people like him in Gaza and elsewhere.

Richard Graham: Does my hon. Friend agree that in an environment in which the people have been so badly let down by their leaders and their neighbours, the best role that Britain can play in this difficult situation is to encourage the moderation and education that come through UNRWA's crucial work in Gaza, and that that is where our focus should be, while encouraging the Palestinians to try to create unity among themselves?

Julian Huppert: Indeed; we have to focus on what is there. I was struck by the fact that many of the younger generation are ready for something different. We met people who are ready to start thinking in another way, and they need our support. I hope that that Minister can comment on whether the British Government are in any way able to provide support and training to some of the up-and-coming young people in Palestine.
	Israel is not acting like a partner for peace at the moment. Although it is clear that the vast majority of Israelis do seek peace, as indeed do the vast majority of Palestinians, the leadership in Israel is undermining the search for a lasting peace. Avigdor Lieberman's recent comments are inflammatory, as is the continued construction of illegal settlements on the west bank-only today, we heard of 1,300 more. The time available for peace is running out. There are currently Israelis and Palestinians who know each other, who have worked together, or who are friends, but this is fading. The younger generations on each side increasingly know each other only as enemies, and with every passing year this becomes worse.
	We were told a chilling story, with which I will conclude. One woman we saw was given permission to travel to Israel to meet a colleague, and to take her daughter with her. Her daughter met her friend, and asked what she was. She was told that she was, inter alia, an Israeli. The daughter said, "That can't be right. Israelis are soldiers who wear masks and carry guns."
	If we are to avoid a perpetual state of conflict, a perpetual siege of Gaza, and a pressure cooker that will eventually explode in furious violence, then Israel and Palestine must up their games. They must find leadership to overcome their differences-to act in the common interest and the long-term interest of their citizens. We in Britain must play a role in supporting and helping them to take these difficult steps. We must be prepared to criticise firmly and actively when needed, and to encourage and assist when required. We must not take our eyes off Gaza. We must not allow the people in Gaza to bear the brunt of collective punishment and bear the burdens of a long and sorry history. The siege has to end. Senior Members of Parliament, from the Foreign Secretary down, must go there to see for themselves what is happening.
	I look forward to hearing the Minister explain how he will ensure that Britain is a more active participant in the region, how Britain will ensure that UN Security Council resolution 1860 and all the others are enforced, and how Britain will ensure that it is a force for peace, for human rights, for the rule of law and for the people.

Yasmin Qureshi: I congratulate the hon. Member for Cambridge (Dr Huppert) on securing this Adjournment debate. It is an extremely important debate that needs to be had.
	I went to Gaza this summer with two Members of the House of Lords. It was the first time that I had been to Gaza or anywhere in the middle east region. Like the hon. Gentleman and his colleagues, we travelled to the Rafah crossing from Egypt into Gaza, and we saw some of the tunnels as well. We spoke to people from UNRWA and saw the people living in the camps. It completely shocked me and, I think, the people with me to see almost three generations of people-grandparents, children and grandchildren: people of all different ages-who had lived in one room for more than 40 or 50 years. That surely cannot be acceptable in the 21st century. It does not matter about the rights and wrongs of Hamas, Israel and so on. We, the international community, have an obligation.
	As Members probably know, under a settlement made a long time ago, people cannot extend their camps into any other space but must keep building on the land they have. There are therefore a number of layers of homes, with people in flats of up to eight floors. On each level there may be a room with a family of 10, 12 or 15 people living in it. Some 1.5 million people live in a space of 2.5 or 3 sq km of land.
	I saw many people rushing off to the beaches, yet we were told that all those beaches were unsafe and polluted. They cannot be cleaned, because pipes would need to be sent out there, and no materials for reconstruction are allowed through. The only pastime that young people seem to have is going to the beach. In this country, we would never tolerate people going en masse to severely polluted beaches that were very bad for their health. A number of people in Gaza have suffered ill health precisely because they have disregarded advice, gone to the beach and gone swimming.
	We spoke to people in Gaza and saw some of the schools that they have constructed. The tragedy of Gaza is that, as the hon. Gentleman said, there is money there. It is not like some parts of the world where there is no money and no finance, and nothing can be done. The money is there, but Israel has imposed embargoes that do not allow anything to be exported or imported properly. In some respects Israel is kicking itself, because if goods were allowed to come in properly and the money could be used to rebuild schools, hospitals and other institutions, it would create an enormous number of jobs and the economy would prosper. Trade with other people would be possible.
	Historically, the best way for countries to negotiate or become friendly has often been through trade. That is often the most peaceful way for countries to build better relationships. By not allowing trade and reconstruction, Israel is hurting itself. It is important that the siege is lifted and reconstruction can start. That will be better for everyone concerned.

Alistair Burt: I congratulate the hon. Member for Cambridge (Dr Huppert)-my hon. Friend now-on securing the debate. I appreciate not only what he said but the way in which he said it, and I thoroughly enjoyed his contribution. It was made better by the fact that he did not have to squeeze it into the usual time and could extend it. I thank him for the great courtesy of giving me the outline of his speech earlier, because, at their best, Adjournment debates are not ambushes but an opportunity for colleagues who share many opinions and concerns to inform each other, the House, yourself, Mr Deputy Speaker, and the public of what we are about.
	I also thank the hon. Member for Bolton South East (Yasmin Qureshi) for her contribution. Both contributions indicated the importance of travel. Occasionally, the House has to defend itself against those who think that every time we step outside our own shores, it is for purposes connected more with us than with what we are about. The descriptions that both colleagues gave of their personal experiences, and those of my hon. Friends the Members for Gloucester (Richard Graham) and for Bradford East (Mr Ward), who accompanied the hon. Member for Cambridge on his visit to Gaza, were good examples of how important it sometimes is to see things on the ground, so that we can report them faithfully to the House. I see my long-standing friend, my hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes), in his place. He will know of the many times that we went to South Africa together in the difficult days of the 1980s. We hope that our personal experience of going there when many others could not made a difference to discussions in the House.

Simon Hughes: I am grateful to my very good friend the Minister for that kindness.
	In probably every constituency in the United Kingdom, and certainly every urban one, there are people who daily worry about the future of Palestine, Israel, Gaza and the middle east. We therefore have a particular responsibility to be informed. I have been twice to the west bank and Israel, although I have not been to Gaza. The faith groups want us to do that, and Britain has a historical responsibility to be as engaged as possible-not just Government but Parliament. My hon. Friend is absolutely right that we are right to go and right to put the matter on the agenda in the House.

Alistair Burt: Yes, indeed, and the number of letters that I deal with from colleagues expressing the concerns of their constituents certainly confirms what my hon. Friend says.
	I applaud the aim of the hon. Member for Cambridge, following his recent visit and that of his colleagues, to ensure that eight new UNRWA schools are built in Gaza. Like him, I welcome the recent announcement that that will be done. The situation in Gaza continues to cause the Government concern, and it was high on the Foreign Secretary's agenda during his recent visit to Israel and the occupied territories. I hope to explain in my remarks what action the Government are taking to reconstruct and stabilise Gaza, and why that matters to the middle east peace process.
	To begin with, I should like to set out the scale of the reconstruction challenge in Gaza and explain briefly how we got where we are. Although we agree with the hon. Gentleman that there is no longer a humanitarian crisis as such in Gaza, the situation there remains extremely fragile and could deteriorate very quickly. Despite Israel's welcome announcement on 20 June of measures to help ease access restrictions, we remain worried about what the UN has termed the "de-development" of Gaza, with the economy, institutions and skill base steadily eroding.
	Although I am not tempted to go back to 1286, it is impossible to consider the current issues in Gaza without recognising the historical context and noting the tragedy of the people of Gaza, caught up in the generations-old dispute concerning Israel and Palestine. After years of occupation, and much international criticism, Israel withdrew from Gaza in 2005, pursuing its policy of swapping land for peace and evicting a number of settlers and settlements. The UK, along with international partners, welcomed the withdrawal as a positive step towards meeting Israel's road map commitments. We also pushed hard for Israel to co-ordinate with the Palestinian Authority on the aftermath of withdrawal.
	However, far from being freed, Gaza's population found itself the battleground for a gradually intensifying dispute between Fatah and Hamas for the control of the land. Hamas's repressive control of Gaza gradually tightened. Israeli soldier Gilad Shalit was kidnapped in 2006, kept completely incommunicado for many years and denied Red Cross access, and he is still detained. Hamas violently ousted Fatah from the Gaza strip in 2007, leading Israel to declare Gaza a "hostile entity". A regular barrage of rockets directed towards southern Israel began. Israeli Government statistics claim that in 2005 Hamas and other Palestinian groups launched about 850 rockets and mortars at Israel from Gaza. By 2008 that figure had climbed past 2,000.
	Although I heard and understood the hon. Gentleman's point about responding differently to those who win elections with policies that we may not like, equally, those who wish to play a serious part in deciding the future of a people need to know that an acceptance and encouragement of violence, and a refusal to accept the existence of the state of Israel, will result only in closed doors, and rightly so.
	A downward spiral of restricted access, the cutting of fuel supplies and retaliatory violence prompted aid agencies to describe the situation in Gaza in early 2008 as the worst since the 1967 Yom Kippur war. As hon. Members know full well, a shaky ceasefire was not renewed towards the end of 2008. Militants in Gaza fired barrages of rockets at Israel, and Israel responded by launching Operation Cast Lead. The conduct of both sides in that war is the subject of a number of inquiries and is not for this debate. However, the consequences for the people of Gaza have been severe.
	To prevent the rebuilding of supplies of arms, Israel ensured a tight blockade of Gaza. The UK Government understand and support Israel's right to protect itself. However, to come to one of the hon. Gentleman's key points, we were, and are, less persuaded that the economic blockade that was simultaneously imposed would be of any benefit to Israel, and we share the hon. Gentleman's assessment. The fact that the economy of Gaza has been so reduced that 80% of Gaza's population is in receipt of food aid, and that unemployment is calculated at 40% for adults and 60% for youth, has not produced serious political gain for Israel or ruin for Hamas, but simply added to the misery of the people. We do indeed call on Israel to rethink that part of its policy, which would not undercut its concern on security, and might indeed, for reasons that have been outlined, assist its security. We make that case regularly to Israel, and we will continue to do so.
	Following Operation Cast Lead and resolution 1860, the international community lobbied Israel hard on the need to allow access for humanitarian and reconstruction relief to Gaza. However, it was not until after the flotilla incident earlier this year that international pressure made a difference, and Israel announced on 20 June measures to ease controls on goods entering Gaza. We welcomed that announcement and the Israelis' subsequent implementation on 5 July of a move from a list of permitted items to a list of banned and dual-use items. The latter step resulted in an increase in the variety and volume of goods entering Gaza.
	Further steps have been taken by Israel, including procedures to allow the entry of dual-use items, such as building materials, into Gaza, and I will come to that key point a little later. The Government of Israel are also taking steps to improve access for Palestinian business people into and out of Gaza. We welcome those steps and acknowledge that the volume and range of goods entering Gaza has increased in recent months.
	I spoke this morning to John Ging, and I very much echo the hon. Gentleman's appreciation of his work. I had the pleasure of meeting John during the summer to help me understand the area for which I now have responsibility. He tells me that the consumer goods picture is much improved. Indeed, he estimates that there is only 20% of the tunnel traffic that there was. Once again, we share the hon. Gentleman's perception. Tunnel traffic simply became a source of revenue to Hamas and to criminals and appears to have done little damage to Hamas politically.
	However, John Ging also said that the situation in terms of construction material remains dire. He cannot find what he needs to tackle the under-resourcing of school building. We share his welcome, and that of the hon. Gentleman and other colleagues, for the eight school projects, but they will not satisfy the demand of 40,000 children. Once again, I echo the hon. Gentleman's point. If UNRWA, with the support of the international community, is not seen to, and cannot, provide the development that is needed, yet Hamas and its allies can provide it because of access to materials through routes other than the official crossing, who will get the blame and who will get the support?
	It is possible that it is not any political ill will that is affecting the delivery of construction material specifically orientated towards UNRWA, and UNRWA must, rightly, be held responsible should any material go missing and assist Hamas. However, John Ging informs me that there is a significant capacity issue, which hon. Members have mentioned. I understand there are sheer logistical difficulties in getting more material through the existing crossing. To that extent, therefore, reopening other crossings may assist, and we certainly intend to take that up, although we appreciate that it requires serious consideration and cost to Israel. The gain, however, may make it well worth while.
	It is not just schools. The sewerage system needs serious work to stop untreated sewage entering the Mediterranean. Some 90% of mains water is undrinkable. As I indicated, 80% of the population is dependent on food aid. It is also vital, therefore, to take steps to revive Gaza's economy, including allowing exports and the movement of people. That is key to ensuring Israel's long-term security interests. The empowerment of Gaza's legitimate, non-Hamas controlled business community will act as a counterweight to radicalisation.

Kerry McCarthy: Before the Minister moves on from aid deliveries to Gaza, will he give us the Government's view on the informal conveys? Those are certainly an issue in Bristol, where people have donated. Trucks have set off from Bristol, and constituents have gone to Gaza to try to deliver food and other aid, but they have been blocked. Is that useful, or would be it better to go through the official channels?

Alistair Burt: The hon. Lady makes an important point, on which I have received a number of letters. Our position is: we do not advise unauthorised travel to Gaza. As we know, it is still a dangerous place, and we cannot guarantee the safety of British nationals who go there. For those who want to contribute aid to Gaza, there are recognised channels to go through, which include the United Nations. We encourage that. There are ways in which people can take aid directly and use existing channels to ensure that it gets through. However, as she will be aware, there are opportunities taken where the political point of breaking the blockade appears to be almost as important as any of the humanitarian aid behind it, with sometimes tragic consequences, so we are right to be cautious. We want to ensure that those who feel strongly have an opportunity to express it, and there are legitimate ways to do so. However, we do not encourage unauthorised activity, hard though it may be for some to accept. We advise people to use the official channels to support Gaza.

Julian Huppert: We had a number of interesting conversations about the convoys while there, and one concern expressed to us was that, in many instances, the goods being provided were not the things that were desired. Medical supplies have far too much of some things, and far too little of others. They do not need more Tamiflu, and they do not need old X-ray scanners; they would rather have some spare parts. Perhaps people considering sending convoys could first find out what is wanted and needed, and then go.

Alistair Burt: That makes a lot of sense. The aid agencies actively involved are very good and know what they are doing. However, I do not want this to be misconstrued. We do not want the aid agencies to be there at all. We want the economy to be working properly, and we want Gaza to be a fully functioning part of the middle east.

Julie Hilling: Mine is a question raised often by constituents. Their belief is that the UN aid is not getting through. Can the Minister reassure me on the Government's view of whether that aid is getting through to Gaza?

Alistair Burt: As I indicated earlier, we know there are capacity problems, but in the main we believe that aid gets through. I do not think it is fair for people to feel that, if they send it through a recognised source, sometimes it all just sits there. There were more issues with that in the past, but we have found, since the flotilla incident, that the Israelis are genuinely moving more goods through, and have responded to the concerns. There might be individual instances of hold-up, and where that happens all pressure should be applied, However, there is a logistical problem with the amount of aid, to which I just referred, and the hon. Lady was right to pick up on that.
	I made the point about ensuring that if the business elite in Gaza are given the opportunity to develop and grow, and handle things themselves, they can be a counterweight to radicalisation. John Ging made an interesting point to me this morning. He said that the closing of the tunnels, with more goods travelling through official routes, has not met with what might have been anticipated, which was an aggressive response from militants seeking to disrupt official traffic. They have gone along with it, partly because, we think, the business community and others have made it clear that they want to see the official channels open and will not accept the militants and extremists getting in the way of the development of the economy. That is good news for those who believe that the economy is the key to the future of Gaza.
	There are issues on the Palestinian side, however, that also need improvement. The Department for International Development is working closely with the Palestinian Authority to help increase its co-ordination of goods into Gaza and to speed up the approvals process. I would like to reiterate the call for Hamas to release Gilad Shalit, because it is clearly unacceptable that he remains in captivity after four years. The Foreign Secretary met the Shalit family during his visit to Israel and heard their experiences at first hand. I also call on Hamas to end its interference in humanitarian operations in Gaza.
	I am sure that hon. Members would agree, following the remarks of the hon. Member for Cambridge, that there are sobering facts on the ground, and that reconstructing Gaza will require vast amounts of reconstruction and development support. He concluded by asking what the British Government are doing and what more we intend to do to fulfil resolution 1860 and other requirements. The United Kingdom should play, and is playing, its part, primarily through aid provided by DFID. We are providing basic services to Palestinian refugees through funding for the United Nations Relief and Works Agency. Some 70% of Gazans are refugees who rely heavily on it. Last week the Minister of State for International Development, who was on a visit to the west bank, announced an additional £8 million for UNRWA, bringing our total support for 2010 to £27 million.
	Turning to the Gazan economy, we have just announced a further £2 million in new funding to support the recovery of Gaza's dormant and damaged private sector, which was laid waste after Operation Cast Lead. That will help 300 existing businesses and four start-ups to generate an additional $5 million in revenue and employ an extra 2,200 people. Finally, we are funding the United Nations and Palestinian Authority teams working to facilitate access to imports in Gaza.

Simon Hughes: The Minister referred to the severe problems with good water supplies and the offshore pollution along the coastal strip. Will he say whether the Government are working with others to deal with what is both an environmental and a health crisis? Clearly we cannot deal with it on our own, but is that on the agenda of DFID or his Department? Clearly, not much has been satisfactorily achieved so far, so what more can we do?

Alistair Burt: So as not to flannel my hon. Friend, I should give a better response when I have spoken to colleagues in DFID. I know that the problem that he raises is a serious one, and it is also caught with the problem of construction materials, which are vital to do the work that is necessary for the sewerage system and the like.

David Ward: We were disturbed by the appalling situation -which we could smell as we drove along the beach-of sewage going into the sea. The terrible consequence is that the sewage is finding its way back into the land through the water table, which is serious for agricultural development as well.

Alistair Burt: My hon. Friend describes an unbearable situation. I know that colleagues are on to it, so rather than speak in generalities I will find some detail. Indeed, if he submits a written question, I can supply an answer, and that will disseminate the information more widely.
	On the diplomatic side, we are working closely with the UN, the office of the Quartet representative- Mr Blair-and the European Union to co-ordinate the international community's demand for further progress. Mr Blair has played a very important role on Gaza, and was helpful in the period immediately following the flotilla incident. He did a great deal of work-and continues to do so-with the Government to deal with the authorities there. We are also working with the European Union to co-ordinate the international community's demand for further progress. Although we welcome the steps that Israel has taken so far, we need to see further progress. In particular, we want to see faster approvals for key UN reconstruction projects. The international community is listening closely to UNRWA's feedback. We urge Israel to work with UNRWA to expedite its reconstruction plans, particularly for schools. We want Israel also to show greater flexibility on the movement of people and exports, in order to increase employment, reduce aid dependency and allow the full movement of humanitarian workers.
	There is a final point to make this evening. Sometimes I worry that a given situation remains unresolved because, in reality, it suits all parties, rather than those most affected, to leave it be. For Israel, Gaza is a heavy security risk-a dagger potentially pointing at its heart, through Hamas. It is a place of missed opportunities, following-Israel believes-the generosity of its withdrawal. For Hamas, Gaza is a counter to Fatah-an element in its war with Fatah, as much as in its role of resistance to Israel. For Egypt, Gaza is a conundrum too-part of the need to resolve the Palestinian situation, but where, in authority, it finds a political entity to which it is opposed, and in whose success it has no more vested interest than Israel. In the middle are the people-the children; those whose future could and should be so much better; those who, as my hon. Friend the Member for Cambridge said, are crying out for leadership, to take them out of this situation, and for a future.
	The only path is that Gaza will be part of the ultimate settlement in the middle east. That is why we and other parties are urging those involved in the direct negotiations to keep at it. We are pressing both sides to stay with the talks, to overcome the difficulties on settlements. That is why the Foreign Secretary pressed the point in relation to Israel, and why all friends of both Israel and Palestine should keep the parties at it. Ultimately, Gaza's future salvation lies in a comprehensive peace settlement: the two-state solution, which is so important.
	As my hon. Friend the Member for Cambridge said, time is running out. My story meets his in terms of those he spoke to. A couple of years ago, I was on Israel's northern border and talking to some of the young people-they are very young-who guard those border posts. I asked them whether their children and grandchildren would be doing the same thing, and they thought that they probably would be. That is as sad and depressing as my hon. Friend's story.
	We have lived through momentous times during our period in Parliament. We have seen the unresolvable dealt with, and we have seen all sorts of things change during the past 20 or 30 years. The most intractable political problems have been solved, and it is always possible that that can happen in the middle east. The time is now.
	I hope to visit Israel and the occupied Palestinian territories early next year. I have been to the west bank and Israel, and I hope to have the opportunity to go to Gaza. I will take a message from this House that we are all determined to redouble our efforts to drive the peace process forward, and we look to all those in the region and beyond to join us for the sake of all those in Gaza we have spoken about tonight.
	 Question put and agreed to.
	 House adjourned.